Changes brought in GDP calculations in 2015

What is the New GDP Methodology in India?

In 2015 Central Statistics Office (CSO) introduced few changes in the GDP calculation. They are: 

• Change of base year from 2004-2005 to 2011-2012
  National Statistical Commission advised to revise the base year of all economic indices every five years. Based on that CSO changed the Base year 

• • • Recently The Ministry of Statistics and Programme Implementation (MOSPI) is considering changing of base year for GDP calculation from 2011-12 to 2017-18. 

• Replacing Factor Cost with Market Prices 

• • CSO will measure GDP by the gross value added (GVA) method – a way of calculating GDP at basic prices instead of at factor cost.  
  • The industry-wise estimates will be presented as gross value added (GVA) at basic prices while GDP at market prices will be referred to simply as GDP  

This new method was recommended by the United Nations System of National Accounts in 2008 for reasons like  

• • • This method was followed as international practice  

• • • This will make India’s GDP growth numbers comparable with that of developed nations in future. 
• Broadening of data pool: 

• • Previous data was sampled from Annual Survey of Industries (ASI), which comprised of about two lakh factories. But the new database draws data from the Ministry of Corporate Affairs (MCA21) where more than five lakh odd companies registered. 
  • In simple terms while the earlier data gave only a factory-level picture, the new data looks at the enterprise level. 
• Improved coverage of financial corporations by including stock brokers, stock exchanges, asset management companies, mutual funds and pension funds, as well as the regulatory bodies, SEBI, PFRDA and IRDA. 

• Changes in calculation of agricultural income: 

• • Earlier data only included value added in farm produce but the new data includes value addition in Livestock as well.
    For ex. Value added to the by-product of Meat like head, skin legs etc.