On September 24, the Ministry of Statistics and Programme Implementation (Mospi) hosted a conference in Mumbai, bringing together over 50 economists and forecasters from various organisations to discuss the revision of the base year for India's Gross Domestic Product (GDP).
This event underscores the importance Mospi places on wider consultation, especially given the criticism and debates surrounding previous base year revisions. The involvement of such a large number of experts highlights the ministry's intent to ensure transparency and address the concerns raised during earlier base year changes.
GDP is a broad measure of a country's economic size and is commonly used to compare the economic performance of different countries, particularly in terms of the growth rate of economic activity.
It is usually more meaningful in “real” terms, i.e., netting out the effect of price changes or inflation over the years. Macroeconomic data like GDP requires a base year to provide a reference point for measuring economic growth over time. The base year for macroeconomic data is revised periodically to ensure that the economic measurements accurately reflect the current structure of the economy and account for changes in the relative prices and output composition.
PC Mohanan, former acting chairman of the National Statistical Commission (NSC), said that a base year enables inter-year comparisons as it gives an idea about changes in purchasing power of the people and allows calculation of inflation-adjusted growth estimates.
“However, the indicators that constitute the calculation of GDP in a particular base year become obsolete, which renders the inter-year comparisons pointless as the economy is continually undergoing structural changes. This prompts the need for determining a new base year, which leads to the reconstitution of the indicator basket and provides a more accurate picture of economic growth and trends over time,” he added.
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