Why in the news?
The Government of India has revised the base year of the Wholesale Price Index (WPI) from 2011-12 to 2022-23. The revised WPI series and new Producer Price Indices (PPIs) will be released from June 15, 2026.
What is WPI?
The Wholesale Price Index (WPI):
- Measures changes in prices of goods at the wholesale level.
- Tracks inflation from the producer or wholesale market perspective.
- Released by:
- Office of Economic Adviser under the Department for Promotion of Industry and Internal Trade.
Base Year Revision
- Previous base year: 2011-12.
- New base year: 2022-23.
Why is Base Year Revised?
Base year revision helps:
- Reflect current economic structure.
- Include new products and industries.
- Improve accuracy of inflation measurement.
- Align statistics with changing consumption and production patterns.
Major Changes in Revised WPI Series
Increased Number of Items
- Items increased from: 697 to 957.
Renewable Energy Included
New energy sources added under electricity:
- Solar energy
- Wind energy
- Nuclear electricity
What are Producer Price Indices (PPIs)?
- PPIs measure: Price changes received by producers for goods and services.
How is PPI connected to WPI?
- WPI is essentially a traditional form of producer price measurement for goods.
- PPI expands the scope of WPI by:
- including services,
- measuring both input and output prices,
- capturing production stage inflation more accurately.
- India’s revised WPI and introduction of PPI indicate a gradual transition toward a modern producer inflation framework.
Components Linking WPI and PPI
1. Output Producer Price Index (OPPI)
- Similar to WPI because it measures prices received by producers for selling goods.
- WPI can be viewed as partially comparable to OPPI for goods.
2. Input Producer Price Index (IPPI)
- Measures prices paid by producers for raw materials, fuel, machinery, etc.
- WPI does not capture this aspect separately.
3. Service PPI
- Completely absent in WPI.
- Covers sectors like banking, telecom, insurance, railways, aviation.
[2020] Consider the following statements:
1. The weightage of food in the Consumer Price Index (CPI) is higher than that in the Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which the CPI does.
3. The Reserve Bank of India uses WPI as its key measure of inflation to decide changes in policy rates.
Which of the statements given above is/are correct?
[A] 1 and 2 only
[B] 2 and 3 only
[C] 1 and 3 only
[D] 1, 2 and 3
