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India will launch the Producer Price Index (PPI) on June 15 and gradually phase out the Wholesale Price Index (WPI) over the next five years as part of a major overhaul of its inflation measurement framework, according to information shared by the Ministry of Commerce and Industry during a government briefing.
Under the transition plan, WPI and PPI will be released simultaneously for five years, after which WPI will be discontinued. The ministry said the move is in line with global best practices and recommendations of the International Monetary Fund (IMF), while giving users adequate time to shift from WPI to the new framework. Unlike WPI, which measures only goods, PPI will cover both goods and services, making it more aligned with the structure of India's national accounts and providing a broader picture of producer-level inflation. Officials said the new framework is expected to reduce double-counting and improve the measurement of price movements across the economy. The PPI system will comprise three indices -- Output PPI, Input PPI and Service PPI. Output PPI will track prices received by producers for their products, while Input PPI will measure prices paid for inputs used in production. Service PPI will capture price movements in selected service sectors. According to the ministry, the availability of both Output and Input PPIs will help track how changes in input costs are passed on to final products, offering a better understanding of inflation at the producer level. The first set of indices will be released on June 15 at 12 noon. WPI, Output PPI and Trial Input PPI will be compiled monthly, while Service PPI will be released quarterly. The revised WPI series will adopt 2022-23 as the new base year and expand the commodity basket to 957 items from 697 in the current 2011-12 series. New items include solar, wind and nuclear electricity, while crude petroleum and natural gas have been shifted from the Primary Articles category to Fuel and Power. The ministry said the revised series uses Gross Value of Output (GVO) to determine weights, replacing the earlier Net Traded Value approach. This is expected to better reflect the importance of commodities from a producer's perspective. For Service PPI, the initial coverage will include seven services -- banking, securities transactions, insurance, pension fund management, railways, telecom and passenger air transport. The ministry said these services have been included in the first phase, with more services planned to be added in subsequent phases as data becomes available. The ministry said the introduction of PPI marks a significant step towards modernising India's producer inflation measurement system by bringing it closer to international standards and providing a more comprehensive view of price trends across both goods and services sectors. (ANI)
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