India Shifts to Producer Price Index; WPI to be Phased Out in Five Years

India has officially entered a new era of inflation tracking with the debut of the Producer Price Index (PPI), marking the beginning of a five-year transition to replace the long-standing Wholesale Price Index (WPI). This strategic shift aligns the Indian economy with global standards and follows critical recommendations from the International Monetary Fund (IMF).

A Strategic Shift Toward Global Standards

The decision to move from WPI to PPI follows a report by a working group led by former NITI Aayog member Ramesh Chand. The transition aims to provide a more precise measurement of price changes from the producer's perspective. Unlike the WPI, the new PPI framework includes both Output PPI and Input PPI, offering a granular view of how price fluctuations in raw materials (inputs) are passed through to finished goods (outputs). This level of detail is essential for the more accurate compilation of National Accounts and GDP estimations.

Understanding the New PPI Metrics

For the first time, the Commerce and Industry Ministry has released both output and input data to demonstrate the price transmission mechanism. In May 2026, the All-India Output PPI for all commodities stood at 109.6, up from 108.6 in April 2026. Meanwhile, the All-India trial Input PPI for the manufacturing sector was recorded at 104.9.

The Ministry is currently publishing the Input PPI on an experimental basis to ensure data quality and gather stakeholder feedback. The revised base year for both the WPI and the new PPI is 2022-23, covering a total of 957 items to ensure contemporary relevance.

Sectoral Weightage and Service Coverage

The composition of the Output PPI (Goods) differs significantly from the old WPI structure. In the new index, manufactured items carry the highest weight at 69.93%, followed by agriculture, forestry, and fishing at 22.16%, electricity at 4.49%, and mining and quarrying at 3.42%. For comparison, the previous WPI assigned 63.12% weight to manufactured products and 14.11% to fuel and power.

The rollout for the Service PPI is being conducted in phases. The first phase covers seven critical sectors: banking, securities transactions, insurance, pension fund management, railways, air passenger transport, and telecom services. A second phase will follow, incorporating remaining services through price surveys and GSTN data.

Impact on Inflation Tracking

The launch comes at a time of rising price pressures. As wholesale inflation climbed to 9.68% in May from 8.26% in April, the Output PPI inflation also saw an upward trajectory, rising to 9.4% from 8.1% during the same period. By transitioning to the PPI, policymakers and businesses will gain a more sophisticated tool to understand how input costs influence the final price of goods and services in the Indian market.

Key Takeaways