New Delhi – The Indian government is set to unveil a revamped Wholesale Price Index (WPI) series and three new Producer Price Indices (PPIs) on June 15. This significant update to the nation's inflation measurement framework aims to provide a more precise understanding of price movements across various economic sectors.
New Indices to Enhance Price Tracking
Starting June 15, the Office of Economic Adviser, under the Department for Promotion of Industry and Internal Trade (DPIIT), will release the revised WPI series with a base year of 2022-23. This new series will replace the current WPI, which uses 2011-12 as its base year.
In addition to the updated WPI, three new Producer Price Indices will be launched: the Output Producer Price Index (OPPI), the Trial Input Producer Price Index (IPPI), and a Service Producer Price Index (Service PPI). The Service PPI will initially cover seven key sectors: banking, securities transaction, insurance, management of pension funds, railways, air (passenger), and telecom, all with a base year of 2022-23.
Transition to PPI by 2031
Officials have indicated a long-term strategy to gradually phase out the WPI by 2031, with the three PPIs becoming the primary tools for inflation measurement. The OPPI and IPPI will be released monthly, while the Service PPI will be published quarterly.
The shift towards PPI is considered a crucial step for aligning India's economic data with international standards. Praveen Mahto, Principal Economic Adviser, DPIIT, explained that the PPI is more consistent with the national account structure, eliminates double counting, and can be used for double deflation in national accounts over the long run. These indices will offer a clearer picture of value addition in industries and how input cost inflation translates to output prices.
Impact on Contracts and Industry Data
The transition will require industry stakeholders to adjust, as many existing contracts utilize the WPI for cost escalation clauses. To facilitate this, the Department of Expenditure in the Finance Ministry is expected to issue a circular advising government ministries and departments to gradually adopt the PPI for their contractual provisions. Initially, data for both WPI and PPI will be released concurrently.
Revised WPI Series: Key Changes
The new WPI series significantly expands its coverage, increasing the total number of items from 697 to 957. Notable changes include:
- Inclusion of new energy sources like solar and wind power, and nuclear electricity, under the 'Electricity' Group.
- Reclassification of crude petroleum and natural gas from 'Primary Articles' to the 'Fuel and Power' group, ensuring better alignment with other major fuels such as coal, electricity, and petroleum products.
These revisions are designed to provide a more comprehensive and contemporary reflection of India's economic landscape and price dynamics.