NEW DELHI: The National Statistical Commission (NSC) is examining the working group report on the roadmap for introducing the Producer Price Index (PPI) in India to replace the Wholesale Price Index (WPI) and their recommendations are awaited, a senior official said Monday.
“The working group submitted the report some time back. It (the entire issue of introducing PPI in India) is with the statistical commission. We will wait for the panel recommendation before moving ahead,” the official who did not wish to be named said.
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.
In 2019, the government had constituted a working group for revision of the current series of WPI that has 2011-12 as its base year. The task before the group was to suggest a new base year for WPI and suggest additions and deletions of commodities in the basket of goods whose prices are tracked to draw the index. The working group was also empowered to recommend a roadmap for moving to the Producer Price Index (PPI) from WPI.
Stressing the importance attached to introducing the PPI, the official said India is one of the few countries that still uses WPI. “All members of the G-20, including China,have PPI.”
PPI globally tracks price movements in both goods and services. “Initially PPI in India will only include goods. Services will come at a later stage.”
The WPI will not be discontinued immediately after the PPI is introduced. “Initially we will probably go with both before discontinuing WPI,” the official added.
The WPI’s review is also pending which will revise the base year from 2011-12 and bring in more items to track overall wholesale inflation trend. The present index tracks price movement in 697 items.
PPI is different from WPI in the way that it measures the average change in prices received by producers and excludes indirect taxes. WPI captures the price changes at the point of bulk transactions and may include some taxes and transportation costs. PPI also removes multiple counting bias inherent in WPI. The shedding of additional costs on products imposes by taxes and transportation makes it a more accurate gauge of price movements.
Weight of an item in WPI is based on net traded value whereas in PPI weights are retrieved from Supply Use Tables. PPI also includes services while WPI only has goods.
Source: The Financial Express
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