India Gets its long awaited Producer Price Index.
NEW DELHI: On June 15 2026, the Office of the Economic Adviser under the Department for Promotion of Industry and Internal Trade launched India’s first Producer Price Index suite alongside a revised Wholesale Price Index, replacing a base year that had remained unchanged since 2011-12 and introducing for the first time a dedicated measure of service sector inflation a structural gap in a country where services contribute over 50 percent of GDP. The reform which received cabinet approval on May 25 2026, follows IMF recommendations and a roadmap submitted in April 2026 by a high-level Working Group chaired by agricultural economist and former NITI Aayog member Prof. Ramesh Chand.
What Has Been Launched and How It Works
The new framework introduces four distinct indices simultaneously. The revised Wholesale Price Index continues on a monthly basis with 2022-23 as the new base year. The Output Producer Price Index also monthly, tracks prices that domestic producers receive at the factory gate at first commercial sale. The Trial Input Producer Price Index, published on an experimental basis for the manufacturing sector only tracks what factories pay for raw materials and intermediate inputs. The Service Producer Price Index released quarterly, covers seven service sectors in its first phase.
The choice of 2022-23 as the base year was recommended by the Advisory Committee on National Accounts Statistics to align with the upcoming National Accounts series, the Index of Industrial Production and the Consumer Price Index, eliminating base-year mismatches across India’s core macroeconomic indicators.
The commodity basket of the revised WPI has been expanded from 697 items to 957 items. The weighting methodology has shifted from Net Traded Value to Gross Value of Output, ensuring weights reflect domestic production rather than trade flows. The calculation method has moved from a long-term fixed formula to a short-term chain-based index, and missing price data is now handled through Targeted Mean Imputation rather than the old carry-forward approach.
The First Data Print: What May 2026 Shows
The provisional estimates released on June 15 show headline WPI inflation at 9.68 percent year-on-year in May 2026, up from 8.26 percent in April. The all-commodities WPI index stood at 109.9 in May against 108.8 in April. The Output PPI for all commodities printed at 109.6 in May against 108.6 in April, recording year-on-year inflation of 9.38 percent.
The primary driver was the Fuel and Power category, which registered 30.33 percent year-on-year inflation in May, up from 24.89 percent in April. Within that crude petroleum and natural gas prices surged 61.51 percent annually, while mineral oils rose 49.82 percent both driven by geopolitical disruptions in West Asia during the April-May period.
Manufactured products inflation reached 7.48 percent with chemicals and chemical products at 13.40 percent, basic metals at 12.30 percent and electrical equipment at 11.32 percent.
Madan Sabnavis, Chief Economist at Bank of Baroda, noted that these ex-factory increases embed higher cost structures independent of international crude prices. He warned that price levels in sectors including leather, textiles and rubber are historically sticky and unlikely to decline quickly even if global energy costs soften.
The Trial Input PPI for the manufacturing sector held steady at 104.9 in May, unchanged from April but above the 100.9 recorded in March. The gap between a rising Output PPI for manufactured products at 109.5 and a stabilising Input PPI at 104.9 indicates that producers are successfully passing accumulated cost pressures downstream to restore margins compressed during earlier quarters.
The sharp wholesale acceleration contrasts with retail CPI inflation at 3.93 percent in May 2026. The WPI and Output PPI are heavily weighted toward industrial inputs and bulk energy products, making them more sensitive to global commodity shocks. The CPI’s heavier weighting toward the consumer food basket and essential retail services insulated it from the immediate West Asia energy impact. Economists warn however, that sustained wholesale inflation near 10 percent is likely to pass through to consumer prices in subsequent quarters as retail inventories are replenished at higher cost.
Why This Reform Matters
India stood as a notable outlier among G20 nations by continuing to rely on WPI as its primary non-retail inflation measure. WPI measured prices at the wholesale trading stage, blended domestic and imported commodity costs and excluded services entirely. PPI tracks prices at the point of first sale by the domestic producer, strips out trade margins and tax adjustments and separately measures what producers pay for inputs versus what they receive for outputs.
The reform also addresses a significant distortion in GDP measurement. Because MoSPI deflated nominal GDP using a combination of WPI and CPI, researchers had identified systematic overestimation of real GDP growth. A working paper published by the Peterson Institute for International Economics in early 2026 estimated that this methodology overstated real GDP growth by approximately 1.5 to 2.0 percentage points on average between 2012 and 2023. With Output PPI and Input PPI now available India can move toward Double Deflation, the internationally mandated methodology that deflates output and intermediate consumption separately to produce a more accurate measure of real domestic value addition.
Praveen Mahto, Principal Economic Adviser in the Ministry of Commerce and Industry, stated that the dual-release framework is designed to ensure a smooth transition for businesses and public entities. Because WPI is embedded in commercial contracts, infrastructure project bids and statutory price escalation clauses, the government will publish both indices in parallel until 2031. The Ministry of Finance’s Department of Expenditure will issue a circular directing that all newly drafted long-term contracts extending beyond the 2031 WPI phase-out must be linked to PPI.
What Remains Incomplete
The current architecture has acknowledged gaps. The seven Service PPI sectors banking, securities transactions, insurance, pension fund management, railways, air passenger transport and telecommunications carry no assigned weights because they do not represent the full services economy. This means there is no combined headline service inflation index yet. Major sectors including IT services, healthcare, education, real estate and road logistics are entirely absent from the first phase. The Office of the Economic Adviser plans to address these in Phase 2 using GST Network data and establishment-level price surveys, a process estimated to take six to eight months.
The Input PPI remains experimental and is restricted to the manufacturing sector. A full cross-sector roll-out has been deferred pending improvements in data quality and survey methodology with the experimental phase projected to last approximately two years.
The five-phase roadmap set out by Prof. Ramesh Chand’s Working Group targets full PPI implementation by 2031, when WPI will be discontinued and India will achieve compliance with IMF System of National Accounts 2008 standards. Phase 2 runs through 2027, Phase 3 deepens sectoral coverage through 2028, Phase 4 integrates PPI into National Accounts and Budget documents by 2029 and Phase 5 completes the transition by 2031.
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