03rd January 2025 (12 Topics)

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Panel to Revise WPI and Develop PPI

Context

The Government of India announced the formation of an expert panel tasked with revising the country's Wholesale Price Index (WPI), in light of the structural changes in the economy that have occurred between the current base year of 2011-12 and the proposed new base year of 2022-23. Additionally, the panel will focus on developing the Producers' Price Index (PPI), a key price gauge that has been approved by the Technical Advisory Panel on Statistics of Prices and Cost of Living.

Key Objectives of the Expert Panel

The panel will be led by Ramesh Chand, Member of NITI Aayog.
Revising the WPI: The WPI, which reflects the price changes at the wholesale level, will be updated to better reflect the economic changes over the past decade. This revision will ensure the index remains relevant in tracking price trends in India’s evolving economy.
Developing the PPI: A new Producers' Price Index (PPI) will be formulated to measure the average change in the prices that domestic producers receive for their goods and services. The panel will also evaluate the methodology and composition for compiling this index.

Fact Box:

Wholesale Price Index (WPI)

The WPI is a crucial economic indicator that measures the average change in the prices of goods traded between businesses at the wholesale level, before they reach the retail market.
- It is an important tool for assessing inflationary trends at the producer level, helping to understand price changes in the economy from the perspective of producers rather than consumers.
- The WPI is calculated by the Office of the Economic Adviser (OEA), which is part of the Ministry of Commerce and Industry.
- It is released on a regular basis to provide insights into inflation trends and the cost of production in the economy.
Composition of WPI: The index is divided into three major categories:
- Primary Articles: This category includes agricultural products such as food, vegetables, fruits, and raw materials.
- Fuel and Power: This category includes energy-related products like crude oil, natural gas, coal, and electricity.
- Manufactured Products: This category covers goods that are produced in factories, such as machinery, chemicals, and textiles.
The weightage of each category is determined based on its relative importance to the economy.
Comparison with CPI:
- While the Consumer Price Index (CPI) tracks price changes experienced by consumers at the retail level, the WPI focuses on the producer side of the economy.
- WPI is more relevant for tracking the cost of goods at the wholesale level, whereas CPI reflects how price changes affect consumers directly through the prices they pay at stores.

Limitations of WPI:

The WPI primarily focuses on goods, and may not fully capture the price changes in the services sector, which is growing significantly in the modern economy.
As the services sector increasingly contributes to economic growth, the absence of service-based price indicators in the WPI can limit its comprehensive representation of inflation.

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GS Analyst: Daily Current Affairs

03rd January 2025 (12 Topics)

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Panel to Revise WPI and Develop PPI

Key Objectives of the Expert Panel

Fact Box:

Still Have Questions?

GS Analyst: Daily Current Affairs

Panel to Revise WPI and Develop PPI

Key Objectives of the Expert Panel

Fact Box:

Still Have Questions?

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