Change in base year of GDP, IIP, and CPI

Why in news?

• The Ministry of Statistics and Program Implementation has proposed a new base year of 2022-23 for Gross Domestic Product (GDP), Index of Industrial Production (IIP) and a new base year of 2024 for Consumer Price Index (CPI).
• Gross Domestic Product (GDP): It is the monetary value of all final goods and services produced within the domestic territory of a country within a specific time period.

History of GDP base year revision:

Till date, the base year has been revised seven times.

• Most recent revision: In 2015, the base year was changed from 2004-05 to 2011-12.
• The upcoming 2026 revision will be the eighth base year revision.
• Formation of an Advisory Committee on National Accounts Statistics: A committee was formed by MoSPI under the chairmanship of Biswanath Goldar to change the base year for GDP.

Base Year:  It is the reference year whose prices are used as constant prices to calculate the real increase in national income (removing the impact of inflation).

• It is a benchmark used to calculate real GDP.

Importance of base year change:

• Accuracy in Assessment: New data sources and methods such as the use of data related to GST will be used for economic reforms.
• Removing the Effect of Inflation: After adjusting for inflation, there will be a more accurate measurement of real economic growth.
• Adjustment of Structural Changes: The updated index will better reflect the structural changes taking place in the economy, such as digitalization, gig economy.
• Better Policy Making: Accurate GDP data will lead to better policy making.
• Increased Global Credibility: The International Monetary Fund (IMF), World Bank and rating agencies use this data to assess India’s economy.