Fin min asks ministries to adopt Producer Price Index for price adjustment
This story was originally published at 20:11 IST on 17 August 2026
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NEW DELHI – The finance ministry has asked all ministries and departments to use data from the recently launched Producer Price Index in price adjustment and escalation clauses in future government procurement contracts. Earlier, the ministries used the WPI in price escalation or adjustment.
"Ministries and departments are encouraged to adopt Producer Price Index (PPI) in place of Wholesale Price Index (WPI) in all price escalation clauses of future contracts," the Department of Expenditure said in a memorandum. The Producer Price Index is a more internationally accepted index compared to WPI used in government contracts to define escalation.
Currently, the Department for Promotion of Industry and Internal Trade releases WPI and Producer Price Index on a monthly basis. In June, the department had said that it will replace WPI with output Producer Price Index over the next five years, considering the wide usage of WPI in price escalation clauses. This will give sufficient time for users to switch from WPI to Producer Price Index, the department said. The transition is in line with practices adopted by advanced economies and the recommendations of the International Monetary Fund.
The industry department releases three Producer Price Indices: output Producer Price Index, which tracks the price a factory gets for a produced item; input Producer Price Index, which tracks the prices businesses pay for raw materials and energy to make a product on a monthly basis; and a services Producer Price Index, which is released on a quarterly basis. WPI only tracked prices of goods at the wholesale level. End
Reported by Shweta
Edited by Himanshi Gupta
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