The Government of India has announced a comprehensive overhaul of its inflation measurement system, gradually phasing out the Wholesale Price Index (WPI) over five years and replacing it with a globally aligned Producer Price Index (PPI) system. According to government officials, this transition aims to modernise India's inflation and pricing data framework and align it with global best practices. The dual-index approach will see WPI and the new PPI series released simultaneously for five years, giving businesses, industries and policymakers sufficient time to adjust to the new measurement system. As reported by The Times of India, nearly two decades after a working group was formed to compile producer price index (PPI), the government finally laid out a road map for its introduction. Praveen Mahto, principal economic adviser at DPIIT, explained that the existing WPI framework captures only goods, whereas the proposed PPI will extend coverage to services as well. The new framework will include the Output Producer Price Index (OPPI), Input Producer Price Index (IPPI), and Service PPI components, allowing for a more detailed and layered understanding of price dynamics across the production chain. The transition aligns India with global practices followed by advanced economies and recommendations of the International Monetary Fund (IMF). 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, as stated by the ministry. Mahto confirmed that WPI will continue to remain the official measure of inflation even as the system begins a transition to PPI, with the Department of Expenditure in the Finance Ministry expected to soon issue a circular advising users to gradually shift from WPI to PPI over the next five years.
The Commerce and Industry Ministry has approved the revision in the Base Year of Wholesale Price Index (WPI) from 2011-12 to 2022-23. Accordingly, the revised Wholesale Price Index and New Producer Price Indices are scheduled to be released on 15th of this month, replacing the existing series with base year 2011-12. WPI, Output PPI and Service PPI are being compiled on the basis of Basic Price --which excludes Net Tax and Trade & Transport Margin, marking a significant methodological change in how these indices are calculated and reported. As reported by MoSPI Secretary Saurabh Garg, the government has used WPI 2022-23 data internally to avoid modifications to the April IIP data, which is expected to be available in the public domain within the next few weeks. The number of items covered under the new series of WPI has increased from 697 to 957, providing broader representation of economic activity. 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 will be released on June 15, 2026, with 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 services PPI in subsequent phases, subject to the availability of data. In December 2024 a working group was constituted under the chairmanship of then Niti Aayog Member Ramesh Chand for revision of WPI and compilation of PPI with base year 2022-23. 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, as reported by The Times of India.
The revised WPI series introduces significant methodological improvements, including a chain-based short-term formulation method instead of the long-term formulation used in the previous series, aligning the methodology more closely with international practices. The index now uses 'Targeted Mean Imputation' technique for missing prices, replacing the 'carry-forward' method used earlier, with a linking factor created to enable comparisons between the old and new WPI series during the transition period. The revised WPI expands coverage to 957 commodities from 697, incorporating renewable energy sources such as solar and wind power, along with nuclear electricity, reflecting the evolving composition of India's energy sector. Crude petroleum and natural gas have been shifted from the 'Primary Articles' category to the 'Fuel and Power' group, creating a more integrated framework for tracking energy prices. Weights in the revised WPI are now based on Gross Value of Output (GVO), replacing the earlier approach based on net traded value, better reflecting the economic significance of commodities from a producer's perspective. WPI, Output PPI and Service PPI will be compiled using basic prices, excluding taxes and trade margins, while Input PPI will be calculated using purchaser prices since industries buy inputs from the market. The weight of Fuel and Power in the WPI will increase to 14.11 from 13.15, while the weight of primary articles will increase to 22.76 from 22.62 and for manufactured articles it will be 63.13 in the new index, down from 64.23.
The Department for Promotion of Industry and Internal Trade (DPIIT) announced that it will begin publishing a new set of producer price indicators from June 15, 2026. According to DPIIT, the new producer price indices will provide a broader view of inflation trends across manufacturing and services sectors. The price indices will be released at 12:00 noon on June 15, marking a significant expansion of India's inflation measurement capabilities. The new framework will feature both Output PPI and Input PPI, providing a clearer and more granular picture of price movements across the economy. As reported by Reuters, the inclusion of services is seen as a key upgrade, as it broadens the scope of inflation tracking beyond manufacturing and commodities, with the services component covering banking, securities transactions, insurance, management of pension funds, railways, air passenger services, and telecommunications. The Service PPI will initially cover seven sectors — Banking, Securities Transaction, Insurance, Management of Pension Funds, Railways, Air Passenger Services and Telecom, with additional services to be included in future phases as data availability improves. The Trial Input PPI for manufacturing will be released on an experimental basis from March 2026 onwards to examine data quality and receive feedback from stakeholders. WPI and Output PPI will be released monthly, with the first publication for May 2026 along with back-series data from April 2023 to April 2026, while Service PPI will be released quarterly for the fourth quarter of FY26. Output PPI and Trial Input PPI will be released monthly and Services PPI will be compiled on a quarterly basis.
According to DPIIT's statement, the introduction of these new producer price indices represents efforts to strengthen inflation measurement in the economy and provide policymakers with more detailed insights into price movements across different economic segments. The comprehensive approach covers both output and service sectors, with economists highlighting that the introduction of the PPI could significantly enhance the understanding of inflation trends across different industries by capturing price changes at various stages of production and across multiple sectors. The new framework is expected to improve how inflation is analysed and interpreted, support better pricing decisions by businesses, and enable more targeted monetary and fiscal policy responses. As reported by Reuters, the shift is also expected to strengthen analysis of inflation transmission mechanisms by tracking producer costs before they are passed on to consumers, providing clearer insights into how price pressures move through the economy. Economists say the PPI could provide policymakers with an earlier indication of inflationary pressures by tracking changes in producer prices before they reach consumers, helping distinguish more effectively between supply-side shocks and demand-driven inflation. The availability of both Output PPI and Input PPI provides a better understanding of the price movements of output items vis-à-vis the input items used in an industry, explaining how inflation experienced by producers on input items is passed through the output being produced. The 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. The PPI has been discussed for the past 20 years when its idea was first mooted. While the need to move to PPI from WPI was expressed in 2003 it was only in 2014 that a working group was set up to determine the methodology and data requirements to move ahead. The report of the group came in 2017 but no decision was taken on it.
The transition to PPI is designed to bring India's statistical practices in line with international statistical standards and support the adoption of internationally accepted methodologies. As reported by officials, PPI is more consistent with the structure of national accounts and will support the adoption of the internationally accepted 'double deflation' method, which improves the measurement of real economic growth by separately accounting for changes in input and output prices. According to Reuters, the new PPI framework is being built on supply and use tables, which officials said makes it more consistent with national accounts and reduces double counting. According to MoSPI Secretary Saurabh Garg, the transition from WPI to output PPI would not happen immediately even after the launch of the new index, as the government would first study the stability and reliability of the new series before adopting it for wider use. After the five-year transition period, WPI will be discontinued, marking a major shift in the country's inflation and producer-price measurement framework. The phased approach suggests a cautious implementation strategy, allowing policymakers and statisticians to assess the reliability and stability of the new system before fully replacing the existing framework. The move forms part of a wider effort to modernise India's official statistics, with the government having revised the base years for key macroeconomic indicators, including GDP, the Consumer Price Index (CPI) and the Index of Industrial Production (IIP) over the past year to better reflect current consumption and production patterns. This overhaul comes at a time when wholesale inflation remains under pressure, with wholesale price inflation accelerating to a 42-month high of 8.3 per cent in April, driven by higher energy prices following disruptions linked to the West Asia conflict.
