The government told Parliament that the Advisory Committee on National Accounts Statistics (ACNAS) has recommended to the ministry of statistics and programme implementation to consider 2020-21 as the next base year of National Accounts in view of the structural reforms in the economy. The issue of the base year revision was discussed by ACNAS again in its recent meeting held on 30 October, 2019 and it was recommended to the Ministry to consider 2020-21 as the next base year of National Accounts in view of the structural reforms in the economy. The present base year for gross domestic product is 2011-12.
- The exercise of base year revision of national accounts is guided by the ACNAS comprising experts from the central and state government, academia, the Reserve Bank of India (RBI) and other domain specific experts.
- While selecting a new base year, several activities, including new surveys, are to be planned and carried out to have the latest data for use in the revised base year.
- The ACNAS had earlier recommended to revise the base year of National Accounts from 2011-12 to 2017-18 in view of the likely availability of requisite data.
- The ministry had on November 15 said the committee had recommended that for rebasing of the GDP series, 2017-18 is not an appropriate year to be used as the new base year.
- As per the United Nations System of National Accounts (UN SNA)-2008, the member countries are required to revise the base year of their macro-economic indicators like GDP, Gross Value Added Index of Industrial Production, and Consumer Price Index.
- The government has decided to create a Statistical Business Register by utilizing the data collected through 7th Economic Census. The Statistical Business Register will contain information pertaining to key economic activities of the establishments.
The new base year
- From January 2015, the Central Statistics Office (CSO) updated base year for GDP calculation to 2011-12, replacing the old series base year of 2004-05, as per the recommendations of the National Statistical Commission.
- Base year is carefully selected because of the impact it has on the numbers and the year chosen is usually one in which no serious anomaly was present.
- The new series includes corporate information from the MCA21 database of the Ministry of Corporate Affairs instead of the results obtained from the RBI study on company finances, which means a more comprehensive inclusion of corporate data in GDP numbers.
- It also helps improve accuracy, particularly for the services sector, which accounts for about 60 per cent of GDP.
Why is base year changed?
- Change of base year to calculate GDP is done in line with the global exercise to capture economic information accurately.
- Ideally, the base year should be changed after every five years to capture the changing economy. GDP based on 2004-05 did not reflect current economic situation correctly.
- The new series is also compliant with the United Nations guidelines in System of National Accounts-2008. It takes information for the corporate sector and has better estimates of the unorganised sector from 2010-11 National Sample Survey on unincorporated enterprises and data on sales and service taxes.
- The United Nations System of National Accounts (UN SNA)-2008 is the internationally agreed standard set of recommendations on how to compile measures of economic activity.
- The UN SNA describes a coherent, consistent and integrated set of macroeconomic accounts in the context of a set of internationally agreed concepts, definitions, classifications and accounting rules.
- The UN SNA provides an overview of economic processes, recording how production is distributed among consumers, businesses, government and foreign nations.
- It shows how income originating in production, modified by taxes and transfers, flows to these groups and how they allocate these flows to consumption, saving and investment.
- Consequently, the national accounts are one of the building blocks of macroeconomic statistics forming a basis for economic analysis and policy formulation.
- The UN SNA is intended for use by all countries, having been designed to accommodate the needs of countries at different stages of economic development.
- It also provides an overarching framework for standards in other domains of economic statistics, facilitating the integration of these statistical systems to achieve consistency with the national accounts.