DPIIT finalizing a model to launch a Producer Price Index

Current Context : Department for Promotion of Industry and Internal Trade (DPIIT) has finalised a new model of the Producer Price Index (PPI) in India that may eventually replace the Wholesale Price Index (WPI).

• PPI going ahead in line with most G20 economies.

ABOUT PPI

• It measures the average change in the price a producer receives for his goods/services sold in the domestic market/ exports.

TWO TYPES:

• Output PPI: When goods/ services leave the place of production
• Input PPI: When goods/ services enter the production process.

NEED TO REPLACE WPI

• WPI has inbuilt bias due to double/ multiple counting of same product.
• WPI doesn’t include exports and imports.
• WPI also excludes the service sector, which covers about 55% of GDP.