Ramesh Chand Committee Set Up to Update WPI Base Year

January 3, 2025

The Government of India has established a committee to update the base year for the Wholesale Price Index (WPI), aiming to enhance the accuracy of factory-gate inflation measures. This initiative reflects structural changes in the economy since the last update in 2011-12. The 18-member panel, led by Ramesh Chand of NITI Aayog, is tasked with advising on transitioning the base year to 2022-23. This move is expected to improve the estimation of economic output adjusted for inflation.

Purpose of Updating WPI

The primary goal of updating the WPI is to provide a more precise measure of inflation at the producer level. The current WPI only accounts for goods, neglecting the service sector, which constitutes over half of India’s economic output. By shifting to a more comprehensive Producer Price Index (PPI), the government aims to capture a broader spectrum of economic activity.

Composition of the Committee

The committee comprises 18 experts from various sectors, including economics and finance. Notable members include Soumya Kanti Ghosh, Dharmakirti Joshi, and Indranil Sengupta. The diverse expertise within the panel is expected to facilitate a thorough review of the existing price collection system and propose necessary improvements.

Historical Context of the WPI

The WPI has undergone revisions in the past, with the last update occurring in 2015 when the base year was changed from 2004-05 to 2011-12. This new update aims to reflect the current economic landscape and improve the accuracy of national income calculations. The previous base year has become outdated, necessitating this review.

Transition to Producer Price Index

The transition from WPI to PPI is crucial for capturing price changes across both goods and services. The PPI will provide a more comprehensive understanding of inflationary pressures faced by producers. This is particularly important as India seeks to align its statistical practices with international standards.

Expected Outcomes of the Revision

The revision of the WPI and the introduction of a PPI are expected to yield several benefits. These include improved accuracy in estimating real GDP and a better understanding of inflation trends. A more reliable index will contribute to informed policy-making and economic planning.

Bibek Debroy recommended a PPI for India.
The last WPI revision occurred in 2015.
The new panel has 18 months to submit its report.
The committee includes members from various economic sectors.
WPI currently excludes services and international trade.

Future Directions for Economic Measurement

The committee will not only focus on updating the base year but will also review the methodology for computing WPI and PPI. Recommendations for enhancing the reliability of these indices will be crucial for future economic assessments. This comprehensive approach aims to ensure that India’s statistical system reflects the dynamic nature of its economy.

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