India's new producer price indices to strengthen inflation tracking: Experts
New Delhi, June 15
Economists and industry experts on Monday welcomed the government's rollout of a new producer price index framework, saying it will strengthen inflation tracking, improve industry-level price monitoring and align India's statistical system with global best practices.
The government has introduced the Output Producer Price Index (OPPI), Trial Input Producer Price Index (IPPI) and Service Producer Price Indices (PPI) alongside the revised Wholesale Price Index (WPI) series with 2022-23 as the base year, marking a major overhaul of the country's inflation measurement framework.
Rajani Sinha, Chief Economist at CareEdge Ratings, said the introduction of the output PPI, trial input PPI and services PPI is a positive step towards aligning domestic price indices with international practices.
Rajeev Juneja, President of PHDCCI, described the new series as an important modernisation initiative that would bring India's inflation statistics closer to globally accepted standards.
According to PHDCCI, the parallel publication of WPI and PPI over the next five years will strengthen inflation analysis, improve industry-level monitoring and facilitate a smoother transition to the new framework.
Meanwhile, data released by the government showed that annual wholesale price inflation rose to 9.68 per cent in May from 8.26 per cent in April.
The increase was primarily driven by a sharp rise in fuel and energy costs, with Fuel and Power inflation accelerating to 30.33 per cent. Manufactured Products inflation climbed to 7.48 per cent, while food inflation remained relatively moderate at 4.49 per cent.
"While there has been an uptick in inflation across all major groups, the increase is notable for fuel and power and manufactured goods. This reflects the impact of the West Asia crisis on wholesale prices," Sinha said.
She projected WPI inflation to average around 7.8 per cent in FY27, assuming Brent crude oil prices average around $90 per barrel and cautioned that food inflation risks remain due to the higher probability of an El Niño event this year.
According to Sinha, global energy prices have cooled significantly following recent positive developments in West Asia, although the situation remains fluid.
"So far, oil marketing companies and the government have absorbed much of the rise in crude prices. However, the future trajectory of domestic crude oil prices will depend on evolving global factors," she said.
Shashwat Singh of Bajaj Broking said the biggest contributor to wholesale inflation in May was Fuel and Power inflation, led by sharp increases in crude petroleum and natural gas prices, as well as mineral oils.
While stable retail inflation continues to support consumer demand, the persistent cost-push pressure visible in wholesale prices, particularly from fuel and energy inputs, remains a near-term risk amid ongoing geopolitical uncertainties, he added.
Notably, the government has replaced the old WPI base year of 2011-12 with a new 2022-23 framework.
The revised structure expands the commodity basket from 697 to 957 items, shifts weight calculation to Gross Value of Output (GVO), and lays the foundation for a comprehensive producer price index ecosystem in the country.
— IANS
Reader Comments
Great to see India aligning with global best practices! As someone who works in economic research, I know how crucial accurate price indices are for policy decisions. The expansion from 697 to 957 items is a big improvement. However, I'm concerned about the parallel publication of WPI and PPI for 5 years—won't that confuse analysts and policymakers? Hopefully, the transition will be smooth.
All this talk about indices is fine, but what about the common man? WPI hit 9.68% in May and fuel power inflation is above 30%! 😠 Petrol and diesel prices are already sky-high, and now manufacturers will pass on these costs to us. The government should focus on controlling crude oil prices rather than just changing how we measure inflation.
As a small business owner, this is very relevant. The new Input Producer Price Index will help me understand cost pressures better. But I'm worried about the transition—will my bank and suppliers use the new indices for contracts? Also, the El Niño risk for food inflation is worrying. We had a terrible drought last year in parts of Maharashtra.
I appreciate the technical details—expanding the basket and using GVO for weights makes sense. But I'm skeptical about the timing. With global geopolitical tensions and West Asia crisis fueling energy costs, this seems like a convenient time to change the measurement yardstick. Let's see if the new PPI actually reflects ground realities or becomes another tool for data manipulation. Just saying.
Finally, the government is catching up
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