New Delhi: The Department of Industrial Policy and Promotion (DIPP), has constituted a standing committee under the chairmanship of Planning Commission member Abhijit Sen, to deliberate the issues and methodologies for the compilation of a Producers’ Price Index (PPI).
Sen is currently heading a working group to revise the base year of the wholesale price index (WPI), from 1993-94 to 2004-05. The working group has already submitted its technical report.
The DIPP is in the process of collecting data for a test-run of the new WPI series. The group in its report had recommended that when a PPI is constituted, WPI and PPI should continue for some reasonable period of time before considering replacement of the former by the latter.
It had also suggested that the frequency of the release of PPI should be monthly as is the practice in other countries.
PPI is considered a better measure of inflation than WPI as it could track price changes at the intermediate stages before it creeps into the finished goods stage.
In PPI, only basic prices are used for compilation, while taxes, trade margins and transport costs are excluded.
PPIs, apart from measuring inflation, are used as deflators in the compilation of the Gross Domestic Product.