The country’s gross domestic product or a measure for economic growth was reported at 6.9 per cent for the fiscal year 2013-14 after Government changed the way it calculates growth to bring its measurements in line with international practices. The Government revised the base year from 2004-05 to 2011-12 that propelled the growth rate from earlier estimate of 4.7 per cent on the basis of old base year.
The base year of national accounts was last revised in January 2010. Every five years, the Ministry of Statistics and Programme Implementation (MOSPI) updates the base year of its GDP calculations to have more accurate and real economic data.Chief Statistician of India, TCA Anant said, “The changes are made in the presentation of estimates to improve ease of understanding for analysis and facilitate international comparability. We would start following international practices and use GDP figures based on market prices rather than factor costs.”
According to former CSO Pronob Sen, it’s not just a scientific calculation. “What has happened when we moved to the new base year is we’ve actually got better data. Basically, if you look for instance in the corporate sector, we were earlier going with the RBI forecast and which were based on 2500 corporates. This time around we are using the MCA21data base which is five lakh companies as compared to 2500. So, the quality of data has improved.”
This time with the change in base year, it expects the size of the Indian economy to increase to $1.8 trillion in FY14. Sen added, “Basically it means that in 2013-14 for various reasons, the subsidy element had probably dropped quite sharply and since the subsidy is deducted, lowering of the subsidy pushes up the figure. So, it’s basically getting the data on the subsidy.”
With an increase in the size of the data, indicators such as the fiscal deficit and current account deficit which are expressed as a percentage of GDP are likely to decline to 4.3 per cent from 4.6 per cent of GDP in FY14.While this does ease the fiscal deficit constraint, Aditi Nayar, chief economist at ICRA says, that compliance with fiscal targets should be assessed in absolute terms, for instance, comparing the Central Government’s fiscal deficit for 2014-15 to the budget estimate of Rs5.3 lakh crore.