New Delhi, June 15: Economists and industry experts have welcomed the government’s implementation of the new Producer Price Index (PPI) framework. They believe this initiative will enhance inflation monitoring, improve price tracking at the industry level, and align India’s statistical system with global standards.
The government has introduced a revised Wholesale Price Index (WPI) series along with the Output Producer Price Index (OPPI), Trial Input Producer Price Index (IPPI), and Service Producer Price Index (PPI), using 2022-23 as the base year. This marks a significant shift in the country’s inflation measurement framework.
Rajni Sinha, Chief Economist at Care Ratings, stated that 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 the PHD Chamber of Commerce and Industry (PHDCCI), described this new series as a crucial modernization initiative. He noted that it will bring India’s inflation-related data closer to globally accepted standards.
According to PHDCCI, the parallel publication of WPI and PPI over the next five years will strengthen inflation analysis, enhance industry-level monitoring, and ensure a smooth transition to the new framework.
Meanwhile, government data indicates that the annual wholesale inflation rate rose to 9.68% in May, up from 8.26% in April. This increase is primarily attributed to a sharp rise in fuel and energy prices, with fuel and power inflation reaching 30.33% in May. Manufactured products saw inflation at 7.48%, while food inflation remained relatively controlled at 4.49%.
Rajni Sinha commented, “Although inflation has increased across all major groups, the most significant rises were seen in fuel, electricity, and manufactured goods. This reflects the impact of the West Asia crisis on wholesale prices.”
She projected that if the average price of Brent crude remains around $90 per barrel in the fiscal year 2026-27, WPI inflation could average 7.8%. However, she warned that the likelihood of El Niño this year poses a risk to food inflation.
According to Sinha, recent positive developments in West Asia have led to a significant softening of global energy prices, although the situation is still not entirely stable.
She added, “So far, oil marketing companies and the government have managed a large part of the increase in crude oil prices at their level. However, the future direction of domestic crude oil prices will depend on global conditions.”
Shashwat Singh from Bajaj Broking noted that the primary reason for the rise in wholesale inflation in May was the inflation in the fuel and electricity sectors, which includes significant increases in the prices of crude oil, natural gas, and mineral oils.
He mentioned that stable retail inflation is supporting consumer demand, but the cost-push pressure seen in wholesale inflation due to fuel and energy costs may remain a risk in the near future amid ongoing geopolitical uncertainties.
It is noteworthy that the government has replaced the old base year of the WPI from 2011-12 to 2022-23. Under the new system, the number of items has increased from 697 to 957. Additionally, the weighting will be calculated based on the Gross Value of Output (GVO). This change is considered a significant step towards developing a comprehensive Producer Price Index system in the country.
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