Industrial Sickness and The Index of Industrial Production 

Here we are with another engaging content for all eager for knowledge out there. In today’s article, we will learn about two essential cases starting with industrial sickness and then moving forward to the index of industrial production. Interesting, isn’t it? If you are someone who is aspiring to crack any government examination or just want to be an intellectual, then this article is must-read. We will deal with various aspects related to the topic. So, make sure that you read till the end to not miss out on any piece of information crucial to the topic. Now, without any further ado let’s read.

What Is Industrial Sickness?

  • The state of constant inequality in the debt-equity ratio and misshaping in the financial situation of an industry can be described as Industrial Sickness
  • A sick industry is unable to sustain itself through the procedure of internal resources and is compelled to rely on exter­nal sources for budget for their long-term survival.
  • As per the standards accepted by the Reserve Bank of India (RBI), a sick unit has declared cash defeat for the year of its function and in the determination of the financing, the bank is likely to incur cash defeat for the current year as also in the subsequent year.
  • The government of India defined industrial sickness for the first time under the special provisions in the Sick Industrial Companies Act, 1985. However, it has been redefined under the second amendment in the Companies Act, 2002.
  • According to the 1985 Act, a medium or large industry can be described as sick if it was registered for at least 7 years. Later was lowered to 5 years in the Companies Act, 2002. Further, if it incurred cash defeats in the current year and the preceding year or if its entire net worth has deteriorated.
  • The reason for industrial sickness can be either an internal or an external cause. 
  • Issues like monetary limitation, flaws at the beginning of planning and building, labor and leadership issues, and inadequate, ineffective, and age-old machinery can be termed as internal issues.
  • Further, changes in government policies, an inconsistent supply of inputs, uncertainty on the part of the Government, increased competition, etc can be termed as external causes.
  • As a remedy, the government provides liberal policies, financial assistance, exemption from taxes, etc.

What Is The Index Of Industrial Production (IIP)?

  • The Index of Industrial Production (IIP) is an index that shows the performance of different industrial sectors of the Indian economy.
  • According to the Central Statistical Organisation (CSO), IIP is a combined indicator that estimates the short-term disparities in the magnitude of production of a basket of industrial products during a given time concerning that in a chosen base time.
  • The industry groups that it counts are organized under broad sectors like manufacturing, mining, electricity, and use-based industries like basic goods, capital goods, intermediate goods, infrastructure goods, consumer durables, and consumer non-durables.
  • However, the eight core industries like electricity, steel, refinery products, crude oil, coal, cement, natural gas, and fertilizers represent about 40% of the weight of commodities that are incorporated in the IIP.
  • The government agencies and departments use the index for policymaking. It is used for estimating the Gross Value Added to the manufacturing sector quarterly.
  • This index is the only measure of the physical volume of production. Further, it is extremely useful for the projection of advanced GDP estimates.
  • The IIP is summed and issued by CSO every month. Recently, The Index of Industrial Production (IIP), caught an increase of 1 percent in December 2020.

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