Government Constitutes Panel to Revise Wholesale Price Index (WPI)

Government Constitutes Panel to Revise Wholesale Price Index (WPI)

Sub: Eco

Sec: Inflation and unemployment

Context and Objective

• Purpose: To revise the Wholesale Price Index (WPI) base year from 2011-12 to 2022-23 to reflect structural economic changes.
• Broader Goal: Transition from WPI to a Producers’ Price Index (PPI) for enhanced price tracking and reliability.

Composition of the Panel

• Chairperson:
  • Ramesh Chand, NITI Aayog Member.
• Members (18):
  • Officials from Ministries of Statistics, Finance, Petroleum and Natural Gas, Agriculture, and Consumer Affairs and representatives from RBI and GST Network.

Terms of Reference

• Base Year Revision:
  • Update WPI’s constituents and base year to 2022-23.
• Review Price Collection:
  • Analyze and suggest improvements in the price data collection system.
• Producers’ Price Index (PPI):
  • Develop a new PPI methodology and presentation formats.
  • Recommend a roadmap for transition from WPI to PPI.
• Enhance Reliability:
  • Suggest improvements for greater accuracy and reliability of both indices.
• Flexibility to Co-Opt Experts:
  • Panel chairman may include additional experts/agencies as needed.

Significance of Transition to PPI

• Global Best Practices: Align with international standards for price indices.
• Better Representation: PPI captures producers’ input costs more accurately than WPI.
• Policy Relevance: Enhanced decision-making in economic policy and inflation tracking.

Wholesale Price Index (WPI)

The WPI represents the price level of goods at the wholesale stage, i.e., before they reach consumers. It is used as an indicator of inflation in some economies. 

WPI in India:

• Published by: Office of Economic Adviser, Ministry of Commerce and Industry.
• Current Base Year: 2011-12, implemented in 2017.
• Major Components:
• Primary Articles:
  • Subdivided into:
    • Food Articles.
    • Non-Food Articles (e.g., oilseeds, minerals, crude petroleum).
• Fuel & Power: Includes prices of petrol, diesel, and LPG.
• Manufactured Goods: Largest basket, including textiles, chemicals, cement, metals, sugar, etc.
• WPI Food Index: Tracks food articles and food products within the Primary and Manufactured Products categories.

Producer Price Index (PPI)

Measures wholesale prices from the producers’ perspective, capturing price changes at various production stages before the goods reach the consumer. 

Key Features:

• Captures inflation as experienced by businesses.
• Tracks price changes for raw materials, intermediate goods, and final goods.

CPI vs. WPI

• WPI, tracks inflation at the producer level and CPI captures changes in prices levels at the consumer level.
• WPI does not capture changes in the prices of services, which CPI does.