Key facts
- India has launched Producer Price Index (PPI) data for both goods and services.
- The government intends to phase out Wholesale Price Index (WPI) numbers within five years.
- The PPI aims to offer a more accurate measure of price changes from producers' perspective.
- This transition aligns with international standards and IMF recommendations.
- The revised base year for WPI and PPI is 2022-23, encompassing 957 items.
India has launched its first Producer Price Index (PPI) for goods and services, a move aimed at providing a more accurate measure of inflation from the producer's perspective. This initiative signals a shift away from the Wholesale Price Index (WPI), with the government planning to discontinue WPI numbers within five years. The introduction of PPI aligns with international practices and recommendations from the International Monetary Fund (IMF), which has highlighted the growing need for such a transition.
The new PPI data will offer better insights into price movements, including the relationship between input costs and output prices experienced by producers. The revised base year for both WPI and PPI is 2022-23, covering 957 items. Initially, the Service PPI will include seven services: banking, securities transaction, insurance, management of pension funds, railways, air (passenger), and telecom, with plans to expand coverage in subsequent phases.
Manufactured items constitute the largest component of the output PPI (Goods) with a weight of 69.93%, followed by agriculture (22.16%), electricity (4.49%), and mining (3.42%). This contrasts with the WPI's structure, where manufactured products have a 63.12% weight, fuel and power 14.11%, and primary articles 22.76%.
The shift follows a report by a working group led by Ramesh Chand, which recommended revising the WPI base year and compiling the PPI. According to Chand, PPI is more suitable for National Accounts/GDP compilation and estimating real value addition compared to WPI.