In a statement, the government noted that the WPI continues to be extensively used in contracts and price-escalation clauses, necessitating a gradual shift rather than an immediate replacement
New Delhi: In a move to adopt a globally aligned-pricing framework, the government has decided to gradually phase out the wholesale price index or WPI and replace it with a comprehensive producer price index or PPI system, which will cover output, input and services prices as well. As part of the transition, the WPI and the new PPI series will be released simultaneously for five years, giving businesses, industries and policymakers sufficient time to adjust. The first of its kind will come on June 15.
According to the official sources, the department for promotion of industry and internal trade (DPIIT) under the commerce ministry will release PPI data with the revamped WPI, keeping the base year 2022-23. Currently, the base year of WPI is 2011-12. “The PPI data will not be released on a consolidated basis but through three indices — input PPI, output PPI, and services PPI. The services PPI will be released quarterly, while the other two will be published every month. The revised WPI series will be released with expanded coverage, renewable energy inclusion and improved methodology to strengthen price measurement,” the officials said.
In a statement, the government noted that the WPI continues to be extensively used in contracts and price-escalation clauses, necessitating a gradual shift rather than an immediate replacement. “Considering the wide usage of WPI in price escalation clauses, this index will be released for five years from the date of release of the revised series along with PPI and will be discontinued thereafter. This would give sufficient time to users to switch from WPI to PPI,” the commerce ministry said.
“The transition from WPI to PPI is in alignment with the global best practices adopted by advanced economies and the recommendations of the International Monetary Fund (IMF). Availability of both the Output PPI and Input PPI gives a better understanding of the price movements of output items vis-s-vis input items being used in an industry,” the ministry said.
Among key highlights of the new PPI system, the ministry also said that it has increased the number of items from 697 to 957 in the index. “Inclusion of new sources of energy such as solar and wind, have been added under ‘electricity’ group. In addition, nuclear electricity has been included in the basket as well. Besides, more services also will be added to the ‘service PPI’ basket in subsequent phases on the basis of availability of data,” it added.
