Why in news
The ongoing GDP series with the base year 2011-12 is due for revision.
2020-21 is the proposed new base year.
All required major datasets are said to be available except for Census data.
The NSO is considering using the goods and services tax (GST) data to estimate value addition
replacing the currently used Ministry of Corporate Affairs’ MCA-21 database for the Private Corporate Sector (PCS), which accounts for about 38% of GDP
Importance of GDP
GDP quantifies a country's economic size and is crucial for comparing economic performance across nations.
Evaluated at constant prices to account for inflation, providing a more accurate picture of economic growth.
The GDP base year is updated every 5-10 years to reflect changes in the economy's structure.
The National Statistical Office (NSO) is tasked with “ revising” the GDP series, usually drawing upon expertise from many fields
Why the Change?
The current GDP base year (2011-12) is set to change to 2020-21, with plans to use GST data for improved accuracy.
The shift from the MCA-21 database to GST data aims to better capture corporate output, addressing previous data inadequacies.
Previous methods relied on the Annual Survey of Industries (ASI) and RBI samples, which may not have fully represented the growing corporate sector.
Systematic Overestimation
Recent estimates showed a stark difference in industrial growth rates between the new GDP series and older data, raising skepticism.
Comparisons of Gross Value Added (GVA) and Gross Fixed Capital Formation (GFCF) revealed significant overestimations in the new series based on the MCA-21 data.
Concerns about the reliability of new GDP estimates call for thorough validation of any new data sources, like GST, before use in official calculations.
COMMENTS