Economists and industry experts on Monday welcomed the government’s rollout of a new producer price index (PPI) 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.
