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

In a landmark shift for India's economic monitoring, the government has officially released its first Producer Price Index (PPI) data, marking the beginning of a five-year transition to replace the Wholesale Price Index (WPI). This strategic move aligns India with global economic standards and international recommendations to provide a more nuanced understanding of inflation.

A Strategic Shift from WPI to PPI

For decades, the Wholesale Price Index (WPI) has been the primary gauge for wholesale inflation in India. However, following recommendations from the International Monetary Fund (IMF) and a working group led by former NITI Aayog member Ramesh Chand, India is moving toward the PPI. Unlike the WPI, the PPI offers a dual perspective by tracking both "Output PPI" and "Input PPI."

This distinction allows policymakers to see how price fluctuations in raw materials (inputs) are passed through to the final products (outputs) being produced. This granularity is expected to significantly improve the accuracy of National Accounts and GDP compilation by offering a better measure of real value addition.

The Commerce and Industry Ministry released the inaugural data alongside the May wholesale inflation figures. The transition reveals clear trends in price movements:

To ensure data integrity, the Ministry is publishing the Input PPI for the manufacturing sector on an experimental basis. The trial Input PPI for manufacturing stood at 104.9 for May 2026, allowing the government to collect stakeholder feedback and assess data quality before a full-scale rollout.

Composition and Sectoral Weightage

The new index uses a revised base year of 2022-23 and covers 957 items. A significant difference between the old and new systems lies in the weightage distribution. In the Output PPI (Goods), manufactured items hold the highest weight of 69.93%, followed by agriculture, forestry, and fishing at 22.16%, electricity at 4.49%, and mining/quarrying at 3.42%. This is a notable shift from the WPI, which allocated 63.12% to manufactured products and 22.76% to primary articles.

The rollout will also include a Service PPI. In its first phase, this will cover seven critical sectors: banking, securities transactions, insurance, pension fund management, railways, air passenger transport, and telecom services. Future phases will expand to cover the remaining services using data from price surveys and the GSTN.

Key Takeaways