India to get another index to record price movement

• India is set to launch the PPI (Producer Price Index) soon.  The ministry of industry has set up an internal committee to prepare a framework for the new index. The committee has commissioned studies to arrive at a commodity basket for the PPI. The process could take a couple of years despite a reasonably good wholesale price index (WPI), considered a proxy to the PPI. 
• The PPI measures changes in prices received by domestic producers of goods and services over time. This is different from the retail price paid by consumers that include logistics costs, taxes and other levies. It will give an account of the economy's efficiency in transferring goods and services from the producer to the consumer, who could be the final  consumer or another producer using it as an input.
• India has five gauges of inflation, measuring prices from the wholesale level to the retail level. The WPI is the most widely followed index for inflation and there are four consumer price indices. The WPI measures prices recorded in bulk transactions, while the consumer price indices measure prices paid by the consumer. The current WPI series was launched in September this year with 2004-05 as the base year.
• Once the PPI is in place, there would not be any need for the WPI.
• The US had converted its wholesale price index into a producer price index in 1978.