India is set to launch a producer price index series this month, alongside a revised wholesale price index with a new base year, marking a significant change in the way the country tracks price movements at the producer level, a government official said on Tuesday.
The development represents a structural shift in India’s statistical system for inflation measurement.
According to the official, the move is aimed at aligning the country’s data practices more closely with international statistical standards.
Over time, the new framework is also expected to be used in adjusting inflation from real growth calculations, indicating broader implications for economic reporting and analysis.
India currently relies on the WPI as a key indicator of producer-level inflation.
However, the introduction of the PPI has been under consideration for more than two decades, reflecting a long-standing policy discussion on improving how price changes are measured across sectors of the economy.
Broader coverage to include the services sector
Praveen Mahto, principal economic adviser at the Department for Promotion of Industry and Internal Trade, explained that the existing WPI framework captures only goods, whereas the proposed PPI will extend coverage to services as well.
As cited in a Reuters report, he said the new structure will include output PPI, input PPI, and service PPI components, allowing for a more detailed and layered understanding of price dynamics across the production chain.
The inclusion of services is seen as a key upgrade, as it broadens the scope of inflation tracking beyond manufacturing and commodities.
Mahto also outlined the initial set of services that will be covered under the new index framework.
These include banking, securities transactions, insurance, management of pension funds, railways, air passenger services, and telecommunications.
These sectors represent a mix of financial, transport, and communication services that play a significant role in the broader economy.
Revised WPI series and base year update
Alongside the introduction of the PPI, the Office of Economic Adviser under DPIIT will release a new WPI series on June 15.
This revised series will have 2022/23 as its base year, reflecting an updated statistical benchmark for price comparisons.
The introduction of a new base year is intended to improve the relevance and accuracy of the index, ensuring that it better reflects current economic structures and consumption patterns.
The government sees this revision as part of a broader effort to modernise official economic indicators.
Gradual transition over five years
Officials indicated that India plans to transition from the WPI system to the PPI framework over a period of five years.
However, they noted that the exact timeline is not fixed and will depend on how the newly introduced indices perform in practice and how effectively they can be integrated into policy and statistical use.
The phased approach suggests a cautious implementation strategy, allowing policymakers and statisticians to assess the reliability and stability of the new system before fully replacing the existing framework.
Quarterly release and policy relevance
The services component of the PPI is expected to be released on a quarterly basis, reflecting both data availability and established international practices, according to officials.
Economists have highlighted that the introduction of the PPI could significantly enhance the understanding of inflation trends across different industries.
By capturing price changes at various stages of production and across multiple sectors, the index is expected to improve how inflation is analysed and interpreted.
Experts also believe the new framework could support better pricing decisions by businesses.
In addition, it may enable more targeted monetary and fiscal policy responses, as policymakers will have access to more granular inflation data.
Improved understanding of inflation transmission
The shift is also expected to strengthen analysis of inflation transmission mechanisms.
By tracking producer costs before they are passed on to consumers, the PPI is likely to provide clearer insights into how price pressures move through the economy.
Overall, the introduction of the PPI, alongside the revised WPI series, represents a major step in India’s effort to modernise its inflation measurement system and align it with global statistical standards.
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