The government has announced a change in the base year for calculating the Gross Domestic Product (GDP). It will now be updated from 2011-12 to 2022-23. This means that the government will now compare the new data with the financial year 2022-23 to know the economic position of the country (GDP). This method will give the most accurate estimate of GDP.
There was no change for over a decade. Earlier in 2011-12, the government had changed it. Rao Indrajit Singh, Minister of Statistics and Program Implementation, gave this information in a written reply in the Rajya Sabha on Monday.
The government has constituted a 26-member advisory committee under National Accounts Statistics (ACNAS) headed by Vishwanath Golder on this transformation project. The committee consists of central and state governments, the Reserve Bank of India, academicians and researchers.
What will change with the change in base year?
- Regular updates in the base year make it easier to accurately estimate structural changes in a country's economy.
- After this change, GDP is calculated using the latest data on consumption patterns, sectoral contributions and emerging sectors.
- The inclusion of the latest data gives a more accurate picture of the state of the economy compared to the older base year.
- The economic realities of 2022-23 will provide a more precise framework and analysis for policy making in the country.
What is GDP? GDP is one of the most common indicators used to track the health of an economy. GDP represents the value of all goods and services produced within a country in a specific period of time. It also includes foreign companies manufacturing within the country's borders.
There are two types of GDP There are two types of GDP. Real GDP and Nominal GDP. In real GDP, the value of goods and services is calculated at a base year's value or constant price. Currently the base year for calculating GDP is 2011-12. When nominal GDP is calculated at current price.
How is GDP calculated? The formula is used to calculate GDP. GDP=C+G+I+NX, where C stands for Private Consumption, G for Government Expenditure, I for Investment and NX for Net Exports.
Who is responsible for fluctuations in GDP? There are four important engines for increasing or decreasing GDP. The first is you and me. What you spend contributes to our economy. Second is private sector business growth. It contributes 32% to the GDP. Third is government spending.
This means how much the government is spending to produce goods and services. It contributes 11% to the GDP. And fourth is net demand. For this, India's total exports are subtracted from total imports, as India has more imports than exports, hence its impact on GPD is negative.
Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).
