Department for Promotion of Industry and Internal Trade (DPIIT) is close to finalizing a model to launch a Producer Price Index (PPI) in India that may eventually replace the Wholesale Price Index (WPI) in line with most G20 economies & international standards.
- Previously, Government had set up a Working Group headed by B.N Goldar to suggest methodology and framework for introduction of PPI in India.
Wholesale Price Index (WPI)
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About PPI
- It measures the average change in the price a producer receives for his goods/services sold in the domestic market/ exports.
- Two types:
- Output PPI: When goods/ services leave the place of production
- Input PPI: When goods/ services enter the production process.
Need to replace WPI
- WPI has inbuilt bias due to double/ multiple counting of same product.
- WPI doesn’t include exports and imports.
- WPI also excludes the service sector (about 55% of GDP).
Key Recommendations of the Working Group
- Develop an experimental PPI: With the Base Year 2011-12 and include export and import prices of major items in the PPI basket during the experimental phase.
- Experimental series may have two separate sets of indices - with and without services.
- Switching over from WPI to PPI should be undertaken after the PPI series stabilizes.