Jammu, June 8 -- Many countries still use WPI-Based inflation tracking

By Nantoo Banerjee

It is good that the government has finally decided to introduce the Producer Price Index (PPI) as a more reliable inflation tracker than the Wholesale Price Index (WPI). However, it may not be desirable to dump WPI entirely after a period of the next five years. Wholesale price levels remain highly valuable to assess inflation in a country like India. For instance, domestic producer price of items such as petroleum and pharmaceuticals in India has little link to their market price. Central banks in many countries use both these indices as important indicators. Because changes in input and production costs (what factories pay) typically pass through...