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Current Affairs

Government to decide on new base year for GDP

Date: 06 November 2019 Tags: Basics of Economics

Issue

The Ministry of Statistics and Programme Implementation (MOSPI) will decide on a new base year for calculating the Gross Domestic Product (GDP) in the next few months.

 

Background

Though 2017-18 is under consideration as the new base year, no final decision has been taken as the committees of experts are awaiting some more data before finalising their opinion.

 

Details

  • The economic growth slowed to over six-year low of 5 per cent in April-June this fiscal. The government has been taking steps to boost investment and perk up the sagging economy.

  • The industrial production for September has seen a decline after core sector output contracted 5.2 per cent during the recent month according to experts.

GDP

  • Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

  • As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.

  • GDP can be calculated in three ways, using expenditures, production, or incomes. It can be adjusted for inflation and population to provide deeper insights.

Types of GDP

  • Nominal GDP is the measurement of the raw data.

  • Real GDP takes into account the impact of inflation and allows comparisons of economic output from one year to the next and other comparisons over periods of time.

  • GDP growth rate is the increase in GDP from quarter to quarter.

  • GDP per capita measures GDP per person in the national populace; it is a useful way to compare GDP data between various countries

Selection of base year

  • A base year is the first of a series of years in an economic or financial index. It is typically set to an arbitrary level of 100.

  • New, up-to-date base years are periodically introduced to keep data current in a particular index. Any year can serve as a base year, but analysts typically choose recent years.

  • A base year is used for comparison in the measure of a business activity or economic index.

Current method of GDP calculation

  • India's Central Statistic Office calculates the nation's gross domestic product (GDP).

  • India's GDP is calculated with two different methods, one based on economic activity (at factor cost), and the second on expenditure (at market prices).

  • The factor cost method assesses the performance of eight different industries.

  • The expenditure-based method indicates how different areas of the economy, such as trade, investments, and personal consumption, are doing.