New Delhi: On June 15, India is set to make one of the most consequential changes to its inflation architecture in decades, with the government preparing to launch a new Producer Price Index (PPI) framework alongside a revised Wholesale Price Index (WPI) series.
The move marks the beginning of a five-year transition that will eventually phase out WPI — a benchmark that has shaped pricing contracts, industrial escalation clauses and inflation analysis for generations — and replace it with a broader, globally aligned producer inflation system.
The overhaul seeks to address long-standing limitations in India’s producer inflation measurement. The Department for Promotion of Industry and Internal Trade (DPIIT) will release the revised WPI with a new base year of 2022-23, while simultaneously introducing the country’s first Output Producer Price Index (OPPI), Trial Input Producer Price Index (IPPI) and Service Producer Price Index (Service PPI).
Beyond Wholesale Prices
The shift reflects a fundamental change in how producer-level inflation will be tracked in India. While WPI primarily captures changes in wholesale prices of goods, the new PPI ecosystem is designed to provide a more complete picture by measuring output prices received by producers, input costs incurred during production and inflation trends in key service sectors.
Explaining the rationale behind the transition, Praveen Mahto, Principal Economic Adviser, said, “Considering the wide usage of WPI in price escalation clauses, this index will be released for five years from the date of release of the revised series along with PPI and will be discontinued thereafter.”
Mahto emphasised that the parallel run would allow users adequate time to adapt before PPI becomes the principal benchmark for producer inflation. The transition also aligns India with international statistical practices and recommendations of the International Monetary Fund (IMF), under which producer price indices have largely replaced wholesale price indices as the preferred gauge of producer inflation.
The government argues that the coexistence of Output PPI and Input PPI will significantly improve inflation analysis. “The availability of both Output PPI and Input PPI provides a better understanding of the price movements of output items vis-à-vis the input items used in an industry,” Mahto said. “It also explains how inflation experienced by producers on input items is passed through the output being produced.”
The Service PPI, a long-awaited addition to India’s inflation toolkit, will initially cover seven sectors — banking, securities transaction, insurance, management of pension funds, railways, air passenger services and telecom. More services are expected to be incorporated in subsequent phases as data availability improves.
While the reform represents a major statistical advancement, its success will depend heavily on data quality, continuity and user adoption. India’s corporate sector, infrastructure developers and government agencies have long relied on WPI-linked contracts. Transitioning thousands of commercial agreements to a new benchmark may prove more challenging than the statistical redesign itself.
Rebuilding The Basket
The revised WPI series itself has undergone a substantial overhaul. The number of commodities in the basket has increased from 697 to 957, reflecting structural changes in the economy and the emergence of new industries and products since the current 2011-12 series was introduced in 2017.
One of the most notable changes is the incorporation of renewable and alternative energy sources. Solar power, wind energy and nuclear electricity have been included within the Electricity group, acknowledging the changing composition of India's energy sector.
At the same time, crude petroleum and natural gas have been shifted from the Primary Articles category to Fuel and Power, creating a more coherent framework for tracking energy-related inflation. The reclassification improves consistency because the Fuel and Power group already contains coal, electricity and petroleum products.
The methodology underpinning the index has also been modernised. Unlike the previous WPI series, which relied on Net Traded Value — calculated as Gross Value of Output (GVO) plus imports minus exports — the new series derives weights directly from GVO. Policymakers argue that this better reflects the economic significance of commodities from a producer’s perspective and aligns the index more closely with domestic production realities.
In another important departure, the revised WPI adopts a chain-based short-term formulation for compiling elementary indices, replacing the long-term formulation used in the existing series. Missing price observations will now be estimated through a Targeted Mean Imputation approach rather than the carry-forward method, a change expected to improve statistical robustness and reduce distortions during periods of data disruption.
To facilitate continuity between the old and new series, a linking factor has been computed using the ratio of geometric means of monthly indices during FY25. This factor will be available for All Commodities as well as major groups, allowing analysts and users to compare data across series.
Inflation’s New Lens
The launch comes at a time when inflation measurement is attracting heightened attention. Wholesale inflation accelerated to a 42-month high of 8.3% in April, driven largely by rising energy costs linked to disruptions stemming from the West Asia conflict. Against this backdrop, policymakers appear keen to adopt a framework capable of capturing inflation pressures more comprehensively across production chains.
The first release under the new framework will include provisional data for May 2026 and historical WPI and Output PPI series from April 2023 to April 2026. The Trial Input PPI, covering manufacturing, will initially be published on an experimental basis from March 2026 onwards.
“This would enable the department to examine the data quality and also receive feedback from stakeholders and users,” the ministry said.
The Service PPI will be released quarterly, beginning with provisional data for the fourth quarter of FY26, accompanied by a back series from the first quarter of FY24 to the third quarter of FY26.
The distinction in pricing methodology is also significant. WPI, Output PPI and Service PPI will be compiled using basic prices, excluding taxes and trade and transport margins, while Input PPI will be calculated using purchaser prices, reflecting the actual costs incurred by industries when procuring inputs.
India first introduced WPI in 1942 with 1939 as the base year and has revised the series seven times over the past eight decades. The June 15 rollout therefore represents more than a routine base-year revision. It marks the beginning of the end for a statistical framework that has long served as India’s principal measure of producer inflation and the start of a more sophisticated system designed to capture the increasingly complex dynamics of a modern economy.
Whether the new PPI framework ultimately succeeds in becoming the country’s definitive inflation benchmark will depend not only on methodological improvements but also on how effectively businesses, policymakers and markets embrace the transition. For now, June 15 will stand as a pivotal date in the evolution of India's economic statistics.
(Cover photo by Markus Winkler on Unsplash)