The government has announced a change in the base year for calculating Gross Domestic Product (GDP). It will now be updated from 2011-12 to 2022-23. This means that now the government will compare the new data with the financial year 2022-23 to find out the economic condition (GDP) of the country. This method will give the most accurate estimate of GDP.
There was no change in it for more than a decade. Earlier in 2011-12, the government had made changes in it. Ministry of Statistics and Program Implementation Minister Rao Inderjit Singh gave this information in a written reply in the Rajya Sabha on Monday.
On the project of this change, the government has constituted a 26-member Advisory Committee under National Account Statistics (ACNAS), which is headed by Biswanath Golder. The committee includes a team of central and state governments, Reserve Bank of India, academicians and researchers.
What will change due to change in base year?
- Regular updates in the base year make it easier to accurately estimate structural changes in the country's economy.
- After this change, GDP is calculated through changes in consumption pattern, sectoral contribution and latest data of emerging sectors.
- Including 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 the economy. GDP represents the value of all goods and services produced within a country in a specific time period. In this, the foreign companies which produce within the country's borders are also included.
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 the base year's value or stable price. At present the base year for calculating GDP is 2011-12. Whereas nominal GDP is calculated at current price.
How is GDP calculated?
A formula is used to calculate GDP. GDP=C+G+I+NX, here C means private consumption, G means government spending, I means investment and NX means net export.
Who is responsible for the fluctuations in GDP?
There are four important engines for increasing or decreasing GDP. The first is you and me. Whatever you spend contributes to our economy. Second is private sector business growth. It contributes 32% to GDP. Third is government expenditure.
This means how much the government is spending to produce goods and services. It contributes 11% to GDP. And fourth is, net demand. For this, India's total exports are subtracted from total imports, because India has more imports than exports, hence its impact is negative on GPD.
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