WPI TO PPI (Syllabus: GS Paper 3 – Economy)

Context: Recently, the National Statistical Commission (NSC) has been scrutinizing the working group report outlining the roadmap for introducing the Producer Price Index (PPI) in India as a replacement for the Wholesale Price Index (WPI), and we are eagerly awaiting their recommendations.

oPPI is different from WPI in the way that it measures the average change in prices received by producers and excludes indirect taxes.

Wholesale Price Index (WPI)

• About: The WPI is a gauge used to monitor and record fluctuations in the prices of bulk goods at the wholesale level within India.
• Published by: Office of Economic Adviser, Ministry of Commerce and Industry.
• Base year: WPI has been revised from 2004-05 to 2011-12 in 2017.
• Formula: WPI = (Total value of the basket of goods and services at current prices / Total value of the basket of goods and services at base year prices) x 100
• Component of WPI: Manufactured products = 65% approx (64.2% now)

oPrimary articles = 20% approx (22.6% now)

oFuel and power = 15% approx (13.1% now)

Producer Price Index (PPI)

• About: It is a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller.
• Calculation: PPI = (Value of Total Output at Current Prices ÷ Value of Total Output at Base Year Prices) x 100
• Coverage of PPI: Mining, Manufacturing, Agriculture, Fishing, Forestry, Gas, Electricity, Waste and Scrap materials.