The government is planning to update the base year used for calculating national accounts.
Finance Minister Nirmala Sitharaman informed Parliament on Wednesday that the new base year will be 2022-23, effective from February 27th.
This update aims to make economic data more accurate. Currently, the base year is 2011-12, which is over a decade old.
The Finance Minister explained that this change will better reflect the country’s current economic activities.
She also clarified that the C grade India received in an IMF report for national accounts was not due to poor data quality, but because the data was based on an outdated base year.
Impact on GDP and Inflation Data
With the base year now updated to 2022-23, this issue gained attention when the National Statistical Office (NSO) released GDP figures for the July-September quarter. The country’s real GDP grew by 8.2%, much higher than expected.
However, the initial estimates for budget planning, released on January 7th, will still use the old base year. In February, the Ministry of Statistics
and Program Implementation will release new retail inflation figures, based on 2023-24 prices, which will measure January inflation.
Addressing Data Shortcomings
The base year update will also correct certain gaps in existing data. For instance, expenditure on grains received through the public distribution system is currently not reflected, since people do not pay directly for them.
The Ministry is also revising the Consumer Price Index (CPI). This includes:
Updating commodity weights
Changing the consumption basket
Improving the methodology