Over 11% PPI factory input inflation could have aided fall in deflators

The break-up of these calculations is complicated since many manufactured products are inputs for other manufactured products

The use of double deflators for the manufacturing sector in the recently released gross domestic product (GDP) data has sparked a controversy. 

 

The issue is the opaque nature of computing these deflators. Ideally, input producer price index (PPI) should be subtracted from output PPI and the resultant number should be used to convert nominal gross value added (GVA) into constant prices. However, input PPI for manufactured goods is at a trial stage.  

 

Therefore, the output PPI for items used in the manufacturing segment was used and subtracted from the output PPI for manufactured products to arrive at deflators for the segment. Additionally, output PPI for all commodities and manufactured products for April 2025 is not available in the public domain. Average output PPI inflation for all commodities stood at 9.6 per cent for May and June 2026, and for manufactured products it was 11.4 per cent.  

 

Assuming that PPI inflation for April also behaved similarly — which looks likely considering the index for the month in 2026 — output PPI inflation for factory inputs in aggregate must have risen over 11 per cent in Q1 to produce a fall in deflators. The break-up of these calculations is complicated since many manufactured products are inputs for other factory goods.