NEW DELHI: Nearly two decades after a working group was formed to compile producer price index (PPI), govt Tuesday finally laid out a road map for its introduction. On June 15, govt will unveil the revised wholesale price index, with 2022-23 base, and along with it will come PPI.In five years, govt intends to phase out the wholesale price index (WPI) and adopt PPI as a measure to track the factory gate inflation — the price borne by the producers.Principal economic advisor in DPIIT Praveen Mahto told reporters that PPI, also with 2022-23 base year, will have three components – output and input PPI for the manufacturing sector and service PPI for seven categories – banking, securities transaction, insurance, management of pension funds, railways, air (Passenger), and telecom.“Considering the wide usage of WPI in price escalation clauses in contracts, we will continue with WPI for five years. Thereafter, it will be discontinued,” said Mahto.The services PPI will be released quarterly, and efforts are underway to cover other services sectors as well under it, said Dilip Kumar Sinha, deputy director general.This shift brings India in line with most advanced economies, offering policymakers a comprehensive inflation metric that tracks price pressures faced by both goods and services producers, unlike WPI which only tracks price changes experienced by goods producers. PPI will also act as an early warning indicator for retail inflation as WPI includes taxes and logistics costs borne by the wholesalers, thus distorting the input costs of production. WPI itself is being upgraded with the coverage of the basket set to jump from 697 items to 957. New sources of energy, such as solar and wind, along with nuclear, have been added under the electricity group.
