The government has decided to change 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, and this change will take effect from February 27.
The update is being made to ensure that economic data becomes more accurate. Currently, the base year is 2011-12, which is now more than ten years old.
The Finance Minister explained that updating the base year will help reflect India’s present economic activities more correctly.
Her statement came after an IMF report gave India’s national accounts data a C grade, not because of data quality, but because the base year was outdated.
Impact on GDP and Inflation Data
With the new base year set to 2022-23, the issue became more important after the National Statistical Office (NSO) released GDP numbers for the July–September quarter, showing 8.2% real GDP growth, which was higher than expected.
However, the first estimates released on January 7 for budget preparation will still use the old base year.
In February, the Ministry of Statistics and Programme Implementation will also release new retail inflation data.
These inflation numbers will be based on 2023-24 prices and will measure inflation for January.
Improvements in Data Accuracy
The change in the base year will help correct some weaknesses in the current data.
For example, grains received through the public distribution system (PDS) are not counted as expenditure because people do not pay for them directly.
The Ministry is also revising the Consumer Price Index (CPI) by updating commodity weights, changing the consumption basket, and improving the overall methodology to make the index stronger and more accurate.
