New Delhi, Jul 5 (KNN) The Department for Promotion of Industry and Internal Trade (DPIIT) is in the final stages of developing a model for implementing a Producer Price Index (PPI) in India.

This new index may eventually replace the current Wholesale Price Index (WPI).

DPIIT Secretary Rajesh Kumar Singh stated that consultations with the Ministry of Statistics and Programme Implementation have been completed, and the model has incorporated advice fr0m the International Monetary Fund on methodology.

The proposal still requires review by the National Statistical Commission and other procedural clearances.

The PPI measures wholesale prices fr0m producers' perspectives, tracking prices at various production stages.

It aligns with international standards and has replaced WPI in many countries.

Key advantages of PPI include elimination of double-counting bias present in WPI, inclusion of exports and imports, and coverage of the service sector, which comprises about 55 per cent of GDP.

It also offers improved alignment with international standards and enhanced effectiveness as a deflator for calculating real GDP.

Singh indicated that a transition period would likely occur, during which both WPI and PPI would coexist. The government is also considering updating the current 2011-12 base year for WPI.

Experts note that implementing PPI will require careful consideration of sample preparation, weighting assignments, and price collection frequency.

Particular attention must be given to selecting representative services for inclusion.

The shift fr0m WPI to PPI has been under consideration for over two decades, with many advanced and emerging economies having made this transition since the 1970s.

The move aims to address limitations in the current WPI and provide a more comprehensive economic indicator.

(KNN Bureau)