The Government of India has constituted a Working Group for base revision of the current series of Wholesale Price Index (WPI) from base 2011-12 to 2022-23.

About WPI

It is a measure of the average change of prices of a fixed set of goods at the first point of bulk sale in a commercial transaction in the domestic market over a given period of time.
Released by: Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade, Union Ministry of Commerce & Industry.
Measurement: Measured as weighted average of a basket of commodities.

Composition of Basket: Comprises 697 items categorized into three major groups:
- Primary Articles (Weight: 22.618 out of 100): Consists of 4 sub-groups: Food Articles; Non-Food Articles; Minerals; and Crude petroleum and natural gas.
- Fuel and Power (Lowest weight: 13.152 out of 100): Consists of 3 sub-groups: Coal; Mineral Oils; Electricity.
- Manufactured Products (Highest weight: 64.230 out of 100): Consists of 22 sub-groups.

Description: A close-up of a sign

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About Producer Price Index (PPI)

It measures the average change in the price a producer receives for his goods/services sold in the domestic market/ exports.
Two types:
- Output PPI: Measures the average price change of all covered goods and services resulting from an activity and sold on the domestic/ export markets.
- Input PPI: Measure the change in the prices of all intermediate inputs used in production by a specified sector of the economy.

Need to replace WPI by PPI

Multiple Counting Bias: WPI has inbuilt bias due to double/ multiple counting of same product.
Exclusion of Services: WPI also excludes the service sector (about 55% of GDP).
Exclusion of taxes: News WPI (2011-12) series considers only basic prices and does not include taxes, rebate/trade discounts, transport and other charges.
Advantages of PPI: Cover services, exclude indirect taxes among some, International Prominence of PPI being used by advanced economies like U.S.A. etc.

Comparison

Parameters	WPI	PPI	CPI
Definition	Measures price changes at the wholesale level (before retail).	Measures price changes at the producer level (prices received by producers for goods and services).	Measures price changes at the consumer level (retail prices paid by consumers).
Scope	Covers goods at the wholesale stage before reaching consumers.	Covers goods and services at the producer level, including inputs and outputs.	Covers goods and services consumed by households.
Base Year	2011-12	Not yet officially implemented in India.	2012
Composition	Primarily includes manufactured products, fuel, and primary articles.	Includes both goods and services across different production stages.	Includes goods and services like food, healthcare, education, and housing.
Are services included?	No	Yes	Yes
Measurement	The weights of the WPI are based on production values.	Weights of items are derived from Supply Use Table.	The weights of the CPI basket are based on the average household expenditure taken from the Consumer expenditure survey.
Inclusion of taxes	Excludes indirect taxes	Some variants of PPI may include taxes if they are passed on to producers.	Includes indirect taxes
Multiple Counting bias	Present	Absent	Present
Published by	Office of Economic Advisor, DPIIT, Ministry of Commerce and Industry.	Not yet officially implemented in India.	National Statistics Office (NSO), Ministry of Statistics and Programme Implementation.

Conclusion

The WPI base year revision and the planned transition to PPI may pave the way for a more precise and globally aligned inflation metric. Moving forward, adoption of PPI can also enhance economic policymaking, improve price tracking across sectors, and provide a robust framework for data-driven decisions in a dynamic economy.