Producer Price Index (PPI)

The Producer Price Index is a family of indices that measures the average change over time in the selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. The Wholesale Price Index (WPI) was the name of the index from its inception in 1902 until 1978, when it was renamed the �Producer Price Index.� PPI differs from the Consumer Price Index. While both the PPI and CPI measure price change over time for a field set of goods and services; they differ in two critical areas:

  1. the composition of the set of goods and services, and
  2. the types of prices collected for the included goods and services.

In India, there are mainly three types of measures of general price level namely,

  • wholesale price index (WPI), consumer price index (CPI), and
  • implicit GDP deflator. The WPI is available for all tradable goods including for various groups, subgroups and individual commodities.

CPI reflects the cost of living conditions of a homogeneous group of consumers for which it is constructed and based on retail prices of commodities generally consumed by the group. Currently, four categories of CPI are available in India.

They are CPI for industrial workers (CPI-IW), CPI for agricultural labourers (CPI-AL), CPI for rural labours (CPI-RL) and CPI for urban non-manual employees (CPI-UE). Among the four, CPI-IW is very popular and with better coverage; whereas CPI-AL and CPI-UE are designed to measure the impact of inflation on rural and urban poverty, respectively. The third measure of inflation, GDP deflator is derived from the national accounts as a ratio of GDP at current prices to GDP at constant prices.

Written by princy

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