Our Bureau
New Delhi
The Indian government will launch a major overhaul of its inflation measurement system on June 15, introducing a new Producer Price Index (PPI) alongside a revised Wholesale Price Index (WPI) with a 2022-23 base year. This move ends nearly two decades of planning after a working group was first formed to compile the PPI.
The Department for Promotion of Industry and Internal Trade (DPIIT) will release the new indices, with three components: output and input PPI for manufacturing, plus a services PPI covering seven categories including banking, securities transaction, insurance, management of pension funds, railways, air passenger transport, and telecom. The services PPI will be released quarterly, with plans to cover more service sectors later.
Principal Economic Advisor Praveen Mahto from DPIIT announced that the government intends to phase out the WPI completely over five years and adopt PPI as the primary measure for tracking factory gate inflation. “Considering the wide usage of WPI in price escalation clauses in contracts, we will continue with WPI for five years. Thereafter, it will be discontinued,” Mahto said.
The revised WPI basket will expand significantly from 697 items to 957 items. New energy sources including solar, wind, and nuclear have been added under the electricity group. This shift brings India in line with most advanced economies, offering policymakers a comprehensive inflation metric tracking price pressures faced by both goods and services producers. Unlike WPI, which only tracks price changes for goods and includes taxes and logistics costs that distort input costs, PPI will also act as an early warning indicator for retail inflation.
Dilip Kumar Sinha, deputy director general, confirmed that efforts are underway to expand services coverage under the PPI framework.
