Producer Price Index
Also called: PPI · Topic: Inflation and Index Numbers: CPI, WPI, IIP and the Deflator · NCERT: Class 12, Ch 2 "National Income Accounting"
Meaning
A Producer Price Index (PPI) measures the average change in prices received by domestic producers for their output. It excludes taxes, trade margins and transport costs. So it shows price change at the factory gate, before goods reach traders or shops. The USA and many other countries use a PPI instead of a WPI. India has worked on moving from the WPI to a PPI that also covers services (verify current).
Example
India's WPI covers goods only. Services are now more than half of GDP. A PPI that includes services would give better deflators, the price indices used to convert nominal GDP into real GDP. It would also support double deflation, which could improve real GDP estimates alongside the 2022-23 base revision (verify current).
Don't confuse with
- Wholesale Price Index (WPI): records bulk trading prices, which can include taxes and margins, and covers goods only. It is compiled by OEA-DPIIT.
- CPI: tracks retail prices paid by consumers, including taxes and margins.