New Delhi, February 27 The government on Friday released the new series of Annual and Quarterly National Accounts or GDP estimates, with a base year of 2022–23, replacing the previous series with a base year of 2011–12.
Here is a quick guide to the fundamental terms used to measure India's economic growth.
What is Gross Domestic Product?
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Gross Domestic Product or GDP is the value of final goods and services produced in the domestic economy in a financial year.
What is a base year with reference to National Accounts?
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The base year in National Accounts Statistics is the reference year whose prices are used to calculate real growth. Rebasement refers to a process of updating base-period benchmarks with new updated statistics to arrive at a new economic structure that will serve as the basis for estimating GDP and its components, consumer price index, and index of industrial production, moving forward.
The base year is updated from time to time to reflect the changes that have happened in the economy over the years. This helps make economic data more accurate. It also allows the use of new data sources and better methods for calculating estimates. Under normal conditions, it has been MoSPI's endeavor to revise the base year periodically in five years, as per international recommendations.
Why GDP base revision delayed this time?
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The delay in the release of the new series is due to the Covid pandemic and the implementation of Goods and Services Tax (GST) in 2017-18, which required time for consolidation.
Also, fiscal year 2021-22 witnessed sharp GDP growth largely due to the base effect of post-COVID recovery, making it unsuitable for base revision.
After detailed discussions, the Advisory Committee on National Accounts Statistics recommended 2022-23 as the new base year.
Data from the previous series is expected to be released by December 2026. As per the practice, in India, back-series estimates are recalculated using the revised methodology of the new GDP series up to the previous base year.
What new data are being incorporated in the new GDP series?
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In the new series, actual level estimates are being prepared using regular annual surveys such as the Annual Survey of Unincorporated Sector Enterprises (ASUSE) and the Periodic Labour Force Survey (PLFS).
Earlier, the household sector was estimated using growth rates between surveys or proxy indicators.
Data from GST are being used for allocating all-India estimates for the private corporate sector across states, and for cross-validation in annual accounts.
Data from e-Vahan are being used to estimate Private Final Consumption Expenditure (PFCE) related to road transport services.
Data from the PFMS are being used to compile central government estimates and allocate them among states.
New and updated rates and ratios are being adopted based on recent studies conducted by expert institutions.
What are the major methodological changes in the new GDP series?
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It captures increased dynamism in measuring the household sector, and includes the contribution of hired domestic workers (such as cooks, drivers, and persons cleaning households) by the households included in the estimation of GDP.
It also uses double deflation or single extrapolation, and segregates multi-activity private corporations.
The revised base year improves the measurement of newer sectors like digital services, the platform economy, and gig workers, among others.
