New Delhi, June 2: The Government on Tuesday announced that it has approved the revision of the base year of the Wholesale Price Index (WPI) from 2011-12 to 2022-23 and the compilation of Producer Price Indices (PPIs).
Accordingly, the revised series of WPI inflation with base year 2022-23 will be released on June 15, which would replace the existing series of WPI with base year 2011-12, according to a statement issued by the Ministry of Commerce and Industry.
In addition, the new series of Output Producer Price Index (OPPI), Trial Input Producer Price Index (IPPI), and Service Producer Price Index (Service PPI) of seven services, including Banking, Securities Transaction, Insurance, Management of Pension Funds, Railways, Air (Passenger), and Telecom, with base year 2022-23 will also be released, the statement said.
Transition from WPI to PPI framework
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 statement explained.
The transition from WPI to PPI is in alignment with global best practices adopted by advanced economies and the recommendations of the International Monetary Fund (IMF). The availability of both the Output PPI and Input PPI gives a better understanding of the price movements of output items vis-à-vis input items being used in an industry. It also explains how inflation experienced by producers on input items is passed through to the output being produced, the statement said.
The Service PPIs for seven services have been compiled in the first phase based on the availability of data from administrative sources/agencies. More services are planned to be added to the basket of Service PPI in a subsequent phase on the basis of data availability.
Expanded basket and revised methodology
The WPI and Output PPI are being compiled on a monthly basis and will be available for May 2026 (provisional), along with the back series from April 2023 to April 2026 (37 months), on June 15.
The total number of items has been increased from 697 to 957 in the new WPI series. New sources of energy, such as solar and wind, have been added under the ‘Electricity’ group. In addition, nuclear electricity has been included in the basket.
Crude petroleum and natural gas have been shifted from the ‘Primary Articles’ segment to the ‘Fuel and Power’ segment. This reorganisation would lead to better alignment, as this group already houses other major fuels such as coal, electricity and petroleum products, the statement said.
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Improved methodology for the derivation of weights, improved computation methodology, and an improved method for imputing missing price data are other features incorporated in the new WPI series, the statement added.
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