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Producer Price Index in India, Definition, Formula, Purpose

Producer Price Index (PPI) is a measure of the change in prices that domestic producers receive for their goods and services. Read about Producer Price Index, Definition & Formula in this article.

Sakshi Gupta Last updated on May 25th, 2024 06:27 pm Leave a comment

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Producer Price Index

In India, the Producer Price Index (PPI) is a new index introduced by the Ministry of Commerce and Industry in 2020. The PPI measures the average change in the prices received by domestic producers of goods and services over time. It is a price index that reflects the price changes at the producer level in the economy.

Producer Price Index in India

The Producer Price Index in India covers all goods and services produced by the manufacturing sector, mining sector, and electricity sector, and excludes indirect taxes and subsidies. The PPI includes the following categories of goods and services:

Categories	Details
Primary Articles	This includes goods such as food articles, non-food articles, and minerals that are used in the production of other goods.
Fuel and Power	This includes goods such as coal, electricity, and natural gas that are used as inputs in the production process.
Manufactured Products	This includes goods such as textiles, chemicals, and machinery that are produced by the manufacturing sector

In addition to the above categories, the PPI in India also covers services that are provided by the above sectors, such as transportation and storage services, repair and maintenance services, and communication services.

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Producer Price Index Formula

The formula for the Producer Price Index (PPI) in India is:

PPI = (Value of Total Output at Current Prices ÷ Value of Total Output at Base Year Prices) x 100

where:

Value of Total Output at Current Prices: This is the total value of goods and services produced by the manufacturing sector, mining sector, and electricity sector at the current prices prevailing in the market.
Value of Total Output at Base Year Prices: This is the total value of goods and services produced by the manufacturing sector, mining sector, and electricity sector at the prices prevailing in a specific base year.

The PPI measures the average change in the prices received by domestic producers of goods and services over time. It is calculated by taking the ratio of the current value of the total output of goods and services to the value of the total output at a specific base year and multiplying it by 100.

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Producer Price Index Published by

In India, the Producer Price Index (PPI) is published by the Office of Economic Adviser (OEA), Ministry of Commerce and Industry, Government of India. The OEA is responsible for compiling and releasing the PPI on a monthly basis. The PPI measures the average change in the prices received by domestic producers of goods and services over time and is an important indicator of inflation at the producer level in the economy.

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Producer Price Index UPSC

As per the UPSC Syllabus, candidates are required to have a sound understanding of the Indian economy and various economic indicators. The PPI is a crucial economic indicator that measures the average change in the prices of goods and services purchased by producers. Questions related to the PPI and its calculation methodology can be expected in the General Studies Paper III of the UPSC exam.

UPSC Online Coaching and mock tests are helpful for candidates to prepare for the exam by providing them with quality study material, practice papers, and guidance from experienced faculty. By practising mock tests, candidates can get a better understanding of the type and pattern of questions that are asked in the exam and can improve their time management skills.

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Producer Price Index FAQs

Who releases PPI index India?

The Producer Price Index (PPI) in India is released by the Office of Economic Adviser (OEA), Ministry of Commerce and Industry, Government of India.

What is the cost of PPI in India?

The PPI in India measures the average change in the prices received by domestic producers of goods and services over time and is an important indicator of inflation at the producer level in the economy.

How do you calculate purchase price index?

The calculation of PPI involves measuring the change in prices of a basket of goods and services over time that are produced by various sectors of the economy.

Is PPI same as WPI?

PPI and WPI are not the same. While PPI measures the average change in the prices received by domestic producers of goods and services over time, WPI measures the average change in the prices of goods at the wholesale level.

What is PPI vs CPI vs WPI?

The Consumer Price Index (CPI) measures the average change in the prices of goods and services consumed by households over time, while PPI measures the average change in the prices of goods and services produced by producers over time.

About the Author

Sakshi Gupta

Author

I, Sakshi Gupta, am a content writer to empower students aiming for UPSC, PSC, and other competitive exams. My objective is to provide clear, concise, and informative content that caters to your exam preparation needs. I strive to make my content not only informative but also engaging, keeping you motivated throughout your journey!