India to Transition from WPI to PPI: What This Means for Inflation Tracking

Government's Shift to Producer Price Index

New Delhi: The Indian government is set to phase out the Wholesale Price Index (WPI) in favor of a more comprehensive Producer Price Index (PPI) that will encompass prices for outputs, inputs, and services. This change aims to provide a clearer picture of inflation trends within the economy.

Praveen Mahto, the Principal Economic Adviser from the Commerce and Industry Ministry, announced that the Department for Promotion of Industry and Internal Trade (DPIIT) will unveil a revised WPI series with a new base year of 2022-23 on June 15, replacing the previous base year of 2011-12.

Additionally, the department plans to introduce a new Output Producer Price Index (OPPI), a Trial Input Producer Price Index (IPPI), and a Service Producer Price Index (Service PPI) for seven sectors, including Banking, Insurance, and Telecom, also set for release on June 15.

The ministry stated, "Given the extensive use of WPI in price escalation clauses, this index will be published for five years following the release of the revised series alongside the PPI, after which it will be discontinued."

This five-year transition period is designed to allow users ample time to adapt from WPI to PPI.

Mahto indicated that the PPI is anticipated to fully replace the WPI after this period.

This shift aligns with global best practices recommended by advanced economies and the International Monetary Fund (IMF).

The introduction of both Output PPI and Input PPI will enhance understanding of price fluctuations between output products and the inputs utilized in various industries.

It will also clarify how inflation impacts producers regarding input costs and how these costs are reflected in the final output.

The initial phase of Service PPIs for seven sectors has been compiled based on data from administrative sources, with plans to expand this list in future phases as more data becomes available.

The DPIIT has confirmed that both WPI and Output PPI will be compiled monthly, with provisional data available for May 2026, including historical data from April 2023 to April 2026.

The Trial Input PPI, focused solely on the manufacturing sector, will be published experimentally starting March 2026.

This approach will allow the department to assess data quality and gather feedback from stakeholders. The Service PPI will be released quarterly, with provisional data for Q4 of 2025-26 and historical data from Q1 of 2023-24 to Q3 of 2025-26.

Dilip Kumar Sinha, Deputy Director General in the Office of Economic Advisor, noted that the new WPI series (2022-23) will expand the number of items tracked from 697 to 957.

New energy sources, including solar and wind, have been added to the electricity category, and nuclear electricity is now included as well.

Crude petroleum and natural gas have been reclassified from primary articles to the fuel and power category, enhancing alignment with other major fuels like coal and electricity.

WPI, Output PPI, and Service PPI will be compiled based on basic prices, excluding net taxes and trade margins, while Input PPI will be based on purchaser prices as industries acquire inputs from the market.

The revision of WPI is a regular process, with two primary indices used to monitor price changes: the Wholesale Price Index (WPI) and the Consumer Price Index (CPI). The WPI tracks wholesale market prices, while the CPI measures retail inflation, including certain services.

WPI serves as a crucial indicator for assessing average price changes in a fixed basket of commodities at the initial stage of commercial transactions over time, relative to a base year.

Since its inception in 1942 with a base year of 1939, WPI has undergone seven revisions, introducing new base years including 1952-53, 1961-62, and 2011-12, with the current series launched in May 2017.

In April, wholesale price inflation surged to a 42-month high of 8.3 percent.