Explanation:

 Producer Price Index is the measure of the average change in selling prices received by domestic producers for their output over a period of time.

The Government had set up a Working Group under the Chairmanship of Professor B. N. Goldar on 21st August, 2014 to suggest the methodology for introducing Producer Price Index (PPI) in India. The Working Group submitted its report on 31.08.2017. The major recommendations of the Working Group on Producer Price Index are as follows:
(i) PPI in India may be compiled based on Supply Use Table 2011-12 using Total Final Use values for higher level weights. Initially indices based on Total Final Use weights should be compiled separately for goods and services. Aggregate index based on goods and services may be compiled and released once the coverage of service sector indices is adequate and the sector-wise indices are robust and stable.
(ii) Two separate sets of input PPIs may be compiled - one including services and the other excluding services.
(iii) An additional set of output PPI based on Final Demand and Intermediate Demand framework may also be compiled for the benefit of the users.
(iv) The PPIs may be initially compiled on an experimental basis and switching over from WPI to PPI should be undertaken after the PPI series stabilizes and due consultation with the stakeholders is done.
(v) For compilation of experimental PPI, price quotations collected for current series of WPI may be used.
(vi) The experimental PPI will be released on monthly basis. Initially, the base year of the experimental PPI would be 2011-12.
(vii) The Working Group recommended inclusion of 15 services in the PPI basket to begin with. The coverage of service sector may be extended to all key sectors on an urgent basis during the experimental phases of PPI.
The Producer Price Index (PPI) measures the average change in the prices 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. Thus, the output indices measure the average change in prices that producers receive for their outputs while the input indices measure the average change in prices that producers pay for their inputs. PPI contrasts with other measures such as the Consumer Price Index (CPI) which measures changes in prices from buyers or consumers perspective.
The Wholesale Price Index (WPI) basket tracks prices of bulk transactions at first stage of all intermediate and final products. Inherent drawback of the aggregate basket of WPI without appropriate segregation of intermediate and final products involves multiple counting which can lead to bias in measures of inflation. Multiple counting occurs when the price for a specific commodity and the inputs used for its production are included in an aggregate index. PPIs significantly reduce the distortion arising from multiple counting by deriving weights from Supply Use Table compiled by the CSO. Further, the scope of PPI extends to services which are not presently covered under WPI. The benefits of migrating from WPI to PPI are to cover bulk transactions of all goods and services, do away with the bias of double counting inherent in WPI and to compile indices that are conceptually consistent with the National Accounts Statistics (NAS) for use as deflators.