Paper: GS – III, Subject: Indian Economy, Topic: Growth and Development, Issue: Revising the GDP base year.
Context:
Saurabh Garg, Secretary of the Ministry of Statistics and Programme Implementation, announced the revision of the GDP base year. The current base year of 2011-12 will be replaced with 2022-23.
- The revised data series with the new base year will be released on February 27, 2026.
- The base year for the Index of Industrial Production (IIP) will also be revised to 2022-23.
- The base year for the Consumer Price Index (CPI) will be revised to 2023-24.
What is Base Year?
- A base year is a benchmark year used for comparison in economic and statistical calculations.
- It provides a reference point against which current values of indicators like GDP, CPI, and IIP are measured to track real changes over time.
Significance of Base Year Revision
- It allows us to remove the effect of inflation and see real growth.
- Helps in creating index numbers (like CPI = 100 in base year).
- Ensures that the data reflects the current structure of the economy, consumption patterns, and prices.
- Reflect structural economic changes: It captures economic reality better by inclusion of emerging industries.
- Update data sources: Inclusion of better and more recent data (like new surveys or digital databases).
- Itimproves real growth measurement by adjusting inflation more accurately.
- It informs better policymaking by reliable GDP estimates which is essential for resource allocation.
- Global investors demand credible data as India is nearing status as the 3rd largest economy.
The Importance of Regular GDP Revisions for Policy and Market:
Conclusion:
Regular revisions, like changing the base year for GDP calculations, are crucial in ensuring that India’s economic indicators remain relevant and accurate, reflecting ongoing changes in the economy.
- The transition to a new base year is a comprehensive approach to capturing the multifaceted nature of India’s economic evolution, ensuring more reliable and actionable data for policymakers and analysts.
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