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Informist, Thursday, Jun. 4, 2026

 

By Shweta

 

NEW DELHI – Twenty-three years after the government first discussed introducing a Producer Price Index, India finally has one. The Department for Promotion of Industry and Internal Trade will release India's first-ever Producer Price Indices on Jun. 15, marking the beginning of the end for the Wholesale Price Index.

 

This would mark the culmination of an effort that started in 2003, when a working group set up for the revision of the WPI had looked into the feasibility of compiling a Producer Price Index. While the introduction of the index is a welcome move, the path to cover inflation at factory gates and the services sectors will not be easy and may face the same challenges that have hampered the compilation of the index for two decades, experts said.

 

The industry department will release three Producer Price Indices: output PPI--which tracks the price a factory gets for a produced item--and input PPI--which tracks the prices businesses pay for raw materials and energy to make a product--for May, and a services PPI for the March quarter. The WPI only tracked prices of goods at the wholesale level.

 

Alongside the Producer Price Indices, the department will release the revised WPI, with the financial year 2022-23 (Apr-Mar) as the base year, updated from FY12. WPI inflation, based on the FY12 series, rose to a 42-month high of 8.30% in April, reflecting the impact of the war in West Asia.

 

Most developed economies, including the UK and the US, track the Producer Price Index capturing factory-gate prices. This helps to track inflation and exactly how cost gets passed from input to output, eliminating the overlapping of the same transaction as seen in WPI.

"It (PPI) is a better indicator and globally all developed economies have Producer Price Indices to measure the input inflation," Devendra Kumar Pant, chief economist at India Ratings and Research, said. "WPI is a close proxy for PPI but it does not take into account everything, or it does not factor in all inputs ... which producers are paying for during the production process."

But in India, collecting data for the Producer Price Index faces certain challenges. Over the years, the country could not compile the Producer Price Index because of lack of participation from factories, economists said. 

 

"This is not the first time that the PPI has been tried. It has failed previously due to the unwillingness of producers to participate in this national-level survey," Pronab Sen, former chief statistician of India, told Informist. "Producers do not want to tell their customers if they are giving discounts to another customer, as they would demand the same."

 

Of the three new indices the industry department will release on Jun. 15, only the output Producer Price Index is completely ready, thanks to its close alignment with the WPI. Indeed, the government plans to discontinue the WPI after five years and replace it with the output Producer Price Index, officials from the industry department Tuesday said.

 

Still, the Ministry of Statistics and Programme Implementation will study the stability of the output Producer Price Index before replacing the WPI in the GDP and national accounts data. For the time being, it will continue to use the WPI for national accounts data. It will switch to the output Producer Price Index only after seeing its stability and resilience.

 

Then there is the input Producer Price Index, the toughest to compile. In fact, the industry department will release the input Producer Price Index only on a trial basis to assess data quality and obtain feedback from stakeholders and users.

 

"Till the time we did not have the best, we were using the second best, which was WPI," Pant said. "Hopefully this (the new indices) will cover your input prices for the producer prices correctly compared to what we were using a proxy in the format of WPI."

 

The industry department will also release the services Producer Price Index for seven services--banking, securities transactions, management of pension funds, insurance, railways, air (passenger), and telecom--for the quarter ended March. According to economists, it will be easier to collect data for the services Producer Price Index as these seven services are mainly in the organised sector. Eventually, the industry department aims to cover the entire services sector. It plans to cover at least 60% of services by the end of FY27. But covering the entirety of the services sector will be difficult because of the country's large unorganised sector.

 

"Organised sector companies can do that (gather data for the index) on a monthly basis, but the unorganised sector, they are not bothered," Sen said. "I'm sure they (the industry department) do have a plan... perhaps if the survey is done annually, they could get the data."  End

 

Edited by Rajeev Pai

 

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