Syllabus: GS3/Economy
Context
- As per the Ministry of Statistics and Programme Implementation (MoSPI), Gross Domestic Product (GDP), Index of Industrial Production (IIP) and Consumer Price Index (CPI) will see a new base from next year onwards.
About
- In 2024, MoSPI has set up a 26-member Advisory Committee on National Accounts Statistics to decide the base year for GDP data.
- Biswanath Goldar has been appointed as its chairman.
- For GDP, the new series is scheduled to be released on February 27, 2026 with financial year 2022-23 as base year.
- For IIP, 2022 -23 has been tentatively identified as the revised base. IIP on revised base would be released from 2026-27.
- For CPI, 2024 has been identified as the revised base year as the item basket and the weightage of the items would be decided based on the NSO’s Household Consumer Expenditure Survey (HCES) conducted in 2023-24.
- The new CPI series is expected to be published from the first quarter of 2026.
What is Base Year?
- A base year is a benchmark year used for comparison in economic and statistical calculations.
- It provides a reference point against which current values of indicators like GDP, CPI, and IIP are measured to track real changes over time.
- Significance:
- It allows us to remove the effect of inflation and see real growth.
- Helps in creating index numbers (like CPI = 100 in base year).
- Ensures that the data reflects the current structure of the economy, consumption patterns, and prices.
Need for the Change of the Base Year?
- It is usually changed every 7–10 years to reflect:
- New consumption patterns;
- Changes in economic structure;
- Introduction of new goods and services.
- Ensures data remains relevant and accurate.
- This will give a clearer picture about the state of the economy which will help the government to design its economic policies.
Economic Datasets
- Gross Domestic Product (GDP): GDP is the total monetary value of all final goods and services produced within a country’s domestic territory during a specific period (usually a quarter or a year).
- It is calculated by adding up all the expenditures made in the economy, including expenditures by Indians in their individual capacity, expenditures by governments, expenditures by private businesses, etc.
- This provides a picture of the demand side of the economy.
- Current base year used 2011–12.
- Released By: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).
- Index of Industrial Production (IIP): IIP measures the volume of production in the industrial sector, including mining, manufacturing, and electricity.
- It is a volume-based index, not value-based like GDP.
- Indicates industrial activity, helping assess the short-term economic momentum.
- Published monthly and the base year currently is 2011–12 (revision to 2022–23 is underway).
- Released By: NSO, MoSPI.
- Consumer Price Index (CPI): CPI measures the average change in prices paid by consumers for a basket of goods and services over time — i.e., it tracks retail inflation.
- Tracks cost of living and purchasing power.
- Includes items like food, housing, clothing, transport, etc.
- It is published monthly, the current base year: 2012 (to be revised to 2024).
- Released By: NSO, MoSPI.
Conclusion
- By updating the base years—GDP and IIP to 2022–23 and CPI to 2024—India aims to capture recent shifts in consumption patterns, industrial output, and price structures.
- These changes will ensure that the data used for economic analysis and policy formulation is more accurate, relevant, and reflective of contemporary conditions.
- This, in turn, will enhance the effectiveness of government planning, policymaking, and monitoring of the country’s economic progress.
Source: IE
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