Why is there a need to change the Base Year?
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The Base year is periodically revised to uncover the structural changes that have taken place in the economy over time and to depict a better picture of the economy through Gross Domestic Product (GDP), National Income, consumption expenditure and other related aggregates.
Why was 2011-12 chosen as the Base Year?
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The Central Statistics Office (CSO) uses the estimates from the results of Quinquennial Employment and Unemployment Surveys (EUS) of National Sample Survey Organisation (NSSO), which are conducted once in every five years, for revising the base years of national accounts statistics once in every five years.
The change in the base year also coincides with the years for which the NSSO conducts the Quinquennial Employment and Unemployment Surveys.
The 61st Round Quinquennial EUS 2004-05, based on which 2004-05 was chosen as the Base Year, was followed by a Quinquennial EUS in 2009-10. However, the 2009-10 was not considered as a “normal” year since it succeeded the Great Recession of 2008.
Hence, a fresh EUS was conducted in 2011-12, the results of which were used for the compilation of the estimates in the new series with base year 2011-12. The year 2011-12 saw the GDP deflator as the highest in the last 10 years. The GDP deflator is an indicator of system inflation that is used to convert nominal GDP to real GDP.
Why Government gives out the ‘Back Series’ GDP data?
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The back series data serves as a link between the old and new methodology of calculating the GDP.
After introduction of the new base year of National Accounts, the back-series estimates of National Accounts Statistics (NAS) are compiled and released for the years preceding the new base year for completeness and comparability with old base data sets.
Why the revised GDP data fuelled political row?
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Seeing the downward revision of India’s growth rate during the Congress-led UPA regime from 2004-05 to 2010-11, former Finance Minister P Chidambaram slammed the back series GDP data and called the revision a "bad joke."
Responding to this criticism, Union Finance Minister Arun Jaitley said that what was welcomed by the UPA in 2015 is now being criticised because the GDP growth has been revised downwards.
In 2015, the CSO revised the GDP growth of the last two years of the UPA that is 2012-13 and 2013-14. At that time, the GDP growth was revised upwards. At that time, the revised GDP was welcomed by the UPA government.
He further added that a highly credible organisation like CSO has global credibility and no one has ever alleged motives to it. The revised numbers are globally more comparable as they take into account a far greater representation of the Indian economy and are more reflective of its real state.
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