GDP Base Year Revised
Source: Indian Express
GS III: Indian Economy
Overview
- News in Brief
- Purpose of Base Year Revision
Why in the News?
The Government of India recently proposed to revise the Gross domestic Product (GDP) base year along with base year of other macroeconomic metrics.
News in Brief
- GDP base year – The base year is the reference year used for comparing GDP figures across years to calculate real (inflation-adjusted) growth.
- Current base year in India – 2011–12.
- New proposed base year – 2022–23 (to be implemented from Feb 2026).
Purpose of Base Year Revision
- Reflect fundamental economic changes: By including developing industries, it more accurately depicts economic reality.
- Update data sources: Adding better, more recent data (such as digital databases or fresh surveys).
- By more precisely compensating for inflation, it enhances the measurement of actual growth.
- Reliable GDP estimates, which are crucial for allocating resources, help improve policymaking. Given that India is getting closer to being the third-largest economy in the world, investors expect reliable data.
How is the revision happening?
- Since Independence, it has been completed seven times and is updated every ten years, usually selecting years that ended in 1 (2001, 2011) to correspond with census data.
- Based on the National Statistical Commission’s (NSC) proposal, the GDP base year was changed every five years starting in 1999.
- Due to the interruptions in economic statistics brought on by GST (2017) and demonetisation (2016), 2017–18 is not utilized as the base year.
Impact on
- Consumer Price Index (CPI) – The base year for CPI, which is used to assess the rate of inflation faced by consumers, will be revised to 2023-24.
- Industrial Production (IIP) – The base year for IIP will also be revised to 2022-23.
- IIP tracks volume of production in manufacturing, mining, and electricity sectors and it is also used to gauge short-term economic activity and industrial health.
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