Transition from WPI to PPI
- Context:The Central Government has decided to gradually replace the Wholesale Price Index (WPI) with the Producer Price Index (PPI) over the next five years.
- The move aims to provide a more accurate picture of inflation trends in the economy.
Revised WPI Series
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- The Department for Promotion of Industry and Internal Trade (DPIIT) will release a revised WPI series on 15 June.
- New Base Year: 2022–23.
- It will replace the existing WPI series with base year 2011–12.
Introduction of Producer Price Index (PPI)
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- A new Producer Price Index (PPI) series will also be launched on 15 June.
- PPI will include: Output PPI, Input PPI (Trial), Services PPI.
- Initially, Services PPI will cover seven sectors: Banking ,Securities Transactions, Insurance, Pension Fund Management, Railways, Air Passenger Transport, Telecommunications
Reason-WPI Being Phased Out
- WPI is widely used in price escalation clauses and contracts.
- Therefore, it will continue to be published alongside PPI for five years.
- After the transition period, WPI is expected to be discontinued and replaced by PPI.
Advantages of PPI
- Provides a more comprehensive measure of producer-level inflation.
- Tracks prices of both inputs and outputs.
- Helps understand how increases in input costs are passed on to final products.
- Includes services sector inflation, which is not adequately captured by WPI.
Alignment with Global Standards
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- The shift from WPI to PPI follows international best practices.
- It is in line with recommendations of the International Monetary Fund (IMF).
- Many advanced economies already use PPI as a key inflation indicator.
Data Release Schedule
- WPI and Output PPI will be compiled and released every month.
