Economic Indicator - IIP - Index of Industrial Production

IIP - Index of Industrial Production is an Economic Indicator tracking the production activities on a monthly /quaterly/half yearly/annual basis in the country . Like every other indicator , IIP numbers are produced with a reference point in the past . In case of India , the revised benchmark is 1993-94 , for US its 2002 with level of 100 . The calculated data can be tabulated to form a time series in order to compare the output across various years .

The IIP numbers are calculated in 3 ways as described below :
(1)Use Based -  The industry is categorized broadly as Consumer Goods, Durable and Non durable goods ,Basic and Intermediate goods . 
(2) Sector wise - Industry is categorized sector wise like Electricity , Mining , Manufacturing etc
(3)Detailed Sector - Industry is categorized in to various detailed sectors, the link for which has been provided below . 

Sectors Under Consideration for IIP Calculation : Click on the link here to get the complete list of sectors . Click here

Data Sources for calculation of IIP (for India) :  .The data for the IIP estimate is supplied by 15 source agencies which include Department of Industrial Policy and Promotion, Indian Bureau of Mines, Central Statistical Organisation and Central Electricity Authority, among others.

How is IIP index calculated : IIP index is calcualted with the Laspeyre's formula . The calculation involves following steps . 

(1) Identifying the weights of the various sectors on Product level , Product Group level and Industry level . These weights will be identified on the basis of the total output in sales or gross output value .  The weights and the sectors are updated periodically to incorporate the changing market scenario and the economic dynamics . Weights on the product level can be updated annually while those of Industry level can be updated every 5 years . 

(2) Once the weights are calculated the IIP number is calculated ,The index is a simple weighted arithmetic mean of production relatives calculated by using Laspeyre’s formula
I=Σ(Wi*Ri)/ΣWi,
Where I is the Index, Ri is the production relative of the i-th item for the month in
question and Wi is the weight allotted to it based on Gross Output.
The item-wise indices are vertically aggregated at 2-digit of industrial classification
based on weighted average, weights are proportionate to Gross Value Added.

Information Sources :

Economic Times, Wikipedia , UN Stats ,  http://des.delhigovt.nic.in/ASI/indindex05.pdf
http://www.delhi.gov.in

Mobile Vendor Industry - Infographic by Reuters

A Simple Diagram of Relation between Repo Rate and Inflation

Source : RiskBank

Economic Indicators : Debt/GDP Ratio

Ratio of Debt to GDP is one of the imp factors from economic point of view, used to gauge the economic health of the country. Usually countries strive to have this ratio as low as possible so as to avert such financial and unexpected circumstances.

To start with , lets understand the concept of  GDP   -In a simple way, it’s summing up what all the people earned OR spent over a definite period of time .Logically; both the measures should arrive at the same conclusion.

Alternative Definition is: Gross domestic product (GDP) refers to the market value of all final goods and services produced in a country in a given period.

There are multiple ways of calculating this GDP. For details on how to calculate, click here

Comparison of Sensex returns against Fixed Deposit Rates

Following table compares the returns of investment  in Fixed Deposits and Indian Stock Exchange .

Source : Economic Survey of India 

Stock Exchanges, Investments and Derivatives

The book “Stock Exchanges, Investments and Derivatives” written by V Raghunathan and Prabina Rajib deals with the common issues that any Investor faces , specifically those who do not have the technical background.

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The book is a compilation of 250 most nagging questions an Investor has regarding the Stock market. The book deals with all the basics of the Stock Market. What the market is all about along with a brief history on Indian Markets. All the aspects of the stock market i.e. Equities, IPO, Mutual Funds, Bond Market, Derivatives, Share Pricing models, Introduction to Portfolio Management are introduced chapter wise.

What to expect?

The book is all about sharing the basics of the stock market in a question answer format. The highlight of the book is the simple language that has been used; the concepts are explained in a lucid manner without going into the technical details or using any financial jargons. All the theories and intricate material has been supported by appropriate examples, again which are simple to understand. The author has very tactfully touched all the topics of the market without going into details.

Verdict

I will recommend this book to all those who want to know the basics of the stock market. This is certainly book where I would like to begin. A word of Caution: This book is NOT about how to earn money in Stock Market or Trading Strategies. It’s a book for understanding the concepts.

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