Producer Price Index (PPI)

Producer Price Index (PPI) measures the average change in the price of goods and services either as they leave the place of production, called output PPI or as they enter the production process, called input PPI.

PPI estimates the change in average prices that a producer receives.

 

PPI Vs Wholesale Price Index (WPI)

PPI is different from WPI on following grounds:

• WPI captures the price changes at the point of bulk transactions and may include some taxes levied and distribution costs up to the stage of wholesale transactions. PPI measures the average change in prices received by the producer and excludes indirect taxes.
• Weight of an item in WPI is based on net traded value whereas in PPI weights are derived from Supply Use Table^[1].
• PPI removes the multiple counting bias inherent in WPI.
• WPI does not cover services and whereas PPI includes services.

 

PPI Vs Consumer Price Index (CPI)

PPI is different from CPI on following grounds:

PPI estimates the change in average prices that a producer receives while CPI measures the change in average prices that a consumer pays. The prices received by the producers differ from the prices paid by the consumers on account of various factor such as taxes, trade and transport margin, distribution cost etc..

Weights of items in CPI are derived from Consumer Expenditure Surveys whereas for PPI it is calculated on the basis of Supply Use tables.

1. Supply and use tables or in short supply use tables are in the form of matrices that record how supplies of different kinds of goods and services originate from domestic industries and imports and how those supplies are allocated between various intermediate or final uses, including exports. 

Also See

• WPI Food Index
• Wholesale Price Index (WPI)
• Consumer Price Index (CPI)
• Consumer Food Price Index

Contributed by

Mr. Anupam Mitra (IES 2003)
Email: anupam.mitra@gov.in