Industrial production and agricultural production, Macroeconomics

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Industrial Production and Agricultural Production 

Industrial production and agricultural production are aggregate measures of sectoral outputs. It is a common practice to divide the totality of all economic activities into three broad groups viz. 'Agriculture and related activities', 'Industry' and 'Services'. Industrial production and agricultural production are summary measures of output of activities classified under 'Industry' and 'Agriculture' respectively.

Changes in industrial production are reported in the form of changes in an index number called Index of Industrial Production (IIP). The details of construction of such an index will be examined later. Essentially changes in values of outputs of different industries are weighted according to a specified weighing scheme to arrive at the value of the index number with reference to a 'base year'. Thus the statement 'industrial production increased by 8% this year' simply means that the index number increased by 8% over its value last year. It does not convey information regarding output of any particular industry.

Agricultural production presents relatively fewer problems of this nature but suffers from another set of problems. First the variety of agricultural products is far smaller. Second almost all of them have the same physical unit of measurement viz. metric tons. After dividing all agricultural products into a few broad groups such as 'food grains or cereals', 'pulses', 'oil seeds', etc. one can simply report the quantities in metric tons. It is also possible to construct an index.


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