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In 2015, the [[Central Statistics Office (India)|Central Statistics Office]] (an office under the [[Ministry of Statistics and Programme Implementation]]) of the [[government of India]] made a number of changes to the way it calculated the [[gross domestic product]] of India, including a change in the base year relative to which calculations are done. This change was known as the '''2015 India GDP rebasing''' or just the '''rebasing'''.<ref name=wsj>{{cite news|url = https://www.wsj.com/articles/india-changes-gdp-calculation-method-1422622762|title = India Changes GDP Calculation Method. Statistics Ministry Changing Base Year for Benchmark, Switches to Market-Price Calculation|date = January 30, 2015|last = Zhong|first = Raymond|last2 = Kala|first2 = Anant Vijay|accessdate = October 15, 2017|newspaper = Wall Street Journal}}</ref><ref name=worstall-sensible>{{cite magazine|url = https://www.forbes.com/sites/timworstall/2015/04/18/indias-change-in-gdp-calculation-method-seems-highly-sensible/#501f4847e235|title = India's Change In GDP Calculation Method Seems Highly Sensible|last = Worstall|first = Tim|date = April 18, 2015|accessdate = October 15, 2017|magazine = Forbes}}</ref><ref name=manasi>{{cite web|url = https://manasiecon.wordpress.com/2015/05/14/the-new-contagious-crisis-called-gdp-revision/|title = The New Contagious Crisis called GDP Revision!|date = May 14, 2015|accessdate = October 16, 2017}}</ref><ref name=seekingalpha>{{cite web|url = https://seekingalpha.com/article/2874336-re-basing-ups-indias-gdp-growth-rate-in-2013minus-14-from-5-percent-to-6_9-percent|title = Re-Basing Ups India's GDP Growth Rate In 2013-14 From 5% To 6.9%|publisher = [[Seeking Alpha]]|date = February 2, 2015|accessdate = November 17, 2017}}</ref><ref name=fsg>{{cite web |url=http://blog.frontierstrategygroup.com/2015/10/indias-new-gdp-series-and-why-it-matters/ |title=India's new GDP series and why it matters |publisher=Emerging Markets Insights |author=Pratima Singh |date=October 12, 2015 |accessdate=October 21, 2017}}</ref><ref>{{cite magazine |url=https://www.forbes.com/sites/kenrapoza/2015/02/17/whats-behind-indias-magical-gdp-numbers/#66abb7392c64 |title=What's Behind India's Magical GDP Numbers? |accessdate=October 21, 2017 |archiveurl=https://archive.today/20171021222059/http://www.forbes.com/sites/kenrapoza/2015/02/17/whats-behind-indias-magical-gdp-numbers/#66abb7392c64 |author=Kenneth Rapoza |magazine=Forbes |archivedate=2017-10-21 |url-status=dead }}</ref><ref name=ceic>{{cite web |url=https://www.ceicdata.com/en/blog/early-evaluation-indias-gdp-rebasing |title=An Early Evaluation of India's GDP Rebasing |publisher=CEICdata |date=February 17, 2015 |accessdate=October 21, 2017}}</ref><ref name=ft>{{cite news |url=https://ftalphaville.ft.com/2015/02/03/2108792/india-gdp-growth-rate-up-confidence-in-statistics-down/ |title=India: GDP growth rate up, confidence in statistics down? |author=David Keohane |date=February 3, 2015 |newspaper=[[Financial Times]] |accessdate=October 21, 2017}}</ref><ref name=businesstoday/>

== Timeline ==

The new method was used to release updated numbers for Fiscal Year 2013 (April 2013 to March 2014) and 2014 (April 2014 to March 2015). Initial announcements about the change were made in February 2015, and additional series were released in 2015; much of the commentary on the changes happened in April 2015.<ref name=worstall-sensible/><ref name=seekingalpha/><ref name=businesstoday>{{cite web|url = http://www.businesstoday.in/current/economy-politics/statisticians-face-queries-on-gdp-calculation/story/218261.html|title = Statisticians face queries on GDP calculation|last = Singh|first = Rajesh Kumar|date = April 17, 2015|accessdate = November 18, 2017|publisher = Business Today}}</ref>

== Changes made ==

There were two main changes made to bring Indian GDP calculations more in line with international standards as enshrined in the [[System of National Accounts]]: change of the base year to 2011/12, and switch to market prices. A number of other minor changes were made, such as better data sources, and new classification and calculation methods.

=== Change of base year ===

Since January 2010, the base year used by statisticians in India's [[Central Statistics Office (India)|Central Statistics Office]] was the months endinyear for calculations to the year ending March 2012 (i.e., the 2011/12 year).<ref name=wsj/><ref name=worstall-sensible/><ref name=seekingalpha/><ref name=reuters/> According to the Frontier Strategy Group, India changes the base year for its GDP calculation about once every five years, so this change was in keeping with past changes.<ref name=fsg/>

=== Change to using market prices ===

The change also switched GDP calculation to using market prices rather than factor costs. to take into account gross value addition in goods and services as well as indirect taxes and subsidies (adding taxes and reducing subsidies).<ref name=ft/><ref name=reuters>{{cite news|url = http://in.reuters.com/article/india-economy-gdp/methodology-change-sees-indian-economy-grow-faster-than-chinas-idINKBN0LD1AI20150209|title = Methodology change sees Indian economy grow faster than China's|last = Singh|first = Rajesh Kumar|last2 = Kumar|first2 = Manoj|date = February 9, 2015|accessdate = November 15, 2017|work = [[Reuters]]}}</ref> The change was claimed by the government to be more in line with global practices, and specifically in line with the recommendations of the [[System of National Accounts]] (SNA) 2008.<ref name=worstall-sensible/><ref name=fsg/><ref name=ceic/> Commentators generally agreed; Tim Worstall of ''Forbes'' called the previous system of factor costs a relic of the state-driven, manufacturing-focused approach to the economy of the Nehruvian Fabian socialist era.<ref name=worstall-sensible/>

=== Incorporation of more and better survey data ===

The government of India identified three new categories of data sources that were now being used in GDP calculation to make it more reliable:<ref name=seekingalpha/>

* Corporate sector surveys:<ref name=worstall-sensible/> Data was used from MCA21, the new initiative of the [[Ministry of Corporate Affairs]]. Coverage of the financial sector was also increased.<ref name=fsg/>
* Improved coverage of activities of local bodies, both rural and urban, for better coverage of government activity
* Results of the National Sample Surveys conducted by the [[Ministry of Statistics and Programme Implementation]], specifically the Unincorporated Enterprise Survey (2010–11) and Employment-Unemployment Survey (2011–12).<ref name=fsg/><ref name=ceic/>

=== Other changes ===

* A problem common to the old and new series was a lack of annual surveys, particularly to cover changes in the informal sector. The old method used a Labor Input (LI) method, which uses a benchmark-indicator process and then calculates output as the estimated labor input times the value added per worker. The new method used the Effective Labor Input (ELI) method, that distinguishes workers by productivity by assigning weights to different categories of workers.<ref name=fsg/>
* Industrial activities were now classified according to the National Industrial Classification (NIC) 2008.<ref name=fsg/>

== Effect on data series and reception of the change ==

===Composition of GDP ===

Under NAS 2011-2012, the services sector constitutes a smaller proportion of overall GDP at 50.91% as of the fiscal year that ended March 2014 compared to 57.03% under the previous system.<ref name=ceic/> Under the new calculation method, industry became 31% compared to the old 25%, whereas services became 51% compared to the old 57%. Within industry, all three components, mining, manufacturing, and construction, were raised.<ref name=ft/> This contrasted significantly with the results of past GDP rebasings, such as the [[2010 Ghana GDP rebasing]],<ref>{{cite news|url = https://www.washingtonpost.com/news/wonk/wp/2012/11/24/think-u-s-gdp-numbers-are-unreliable-check-out-ghanas/|title = Think U.S. GDP numbers are unreliable? Check out Ghana.|last = Plumer|first = Brad|date = November 24, 2012|accessdate = October 16, 2017|newspaper = Washington Post}}</ref><ref>{{cite journal|url = https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/ASJ15%20Section1%20Eng.pdf|title = Revising GDP estimates in Sub-Saharan Africa: Lessons from Ghana|last = Jerven|first = Morten|last2 = Duncan|first2 = Magnus Ebo|journal = The African Statistical Journal|volume = 15|date = August 1, 2012|accessdate = October 16, 2017}}</ref><ref>{{cite web|url = https://www.theguardian.com/business/2012/nov/20/economics-ghana|title = Lies, damn lies and GDP. Or, how Ghana went from being one of the poorest countries in the world one day to an aspiring middle-income one the next|last = Jerven|first = Morten|date = November 20, 2012|accessdate = October 16, 2017}}</ref> and the [[2014 Nigeria GDP rebasing]] and similar rebasings in [[Kenya]], [[Uganda]], [[Tanzania]], and [[Zambia]].<ref>{{cite news|url = https://www.ft.com/content/70b594fe-bd94-11e3-a5ba-00144feabdc0?mhq5j=e7|title = Nigeria almost doubles GDP in recalculation|date = April 7, 2014|accessdate = October 17, 2017|last = Blas|first = Javier|last2 = Wallis|first2 = William|newspaper = Financial Times}}</ref><ref>{{cite news|url = https://www.economist.com/news/finance-and-economics/21600734-revised-figures-show-nigeria-africas-largest-economy-step-change|title = Step change. Revised figures show that Nigeria is Africa’s largest economy|newspaper = The Economist|date = April 12, 2014|accessdate = October 17, 2017}}</ref><ref name=brookings-rebasing>{{cite web|url = https://www.brookings.edu/blog/africa-in-focus/2015/03/03/are-african-countries-rebasing-gdp-in-2014-finding-evidence-of-structural-transformation/|title = Are African countries rebasing GDP in 2014 finding evidence of structural transformation?|last = Sy|first = Amadou|date = March 3, 2015|accessdate = October 17, 2017|publisher = Brookings Institution}}</ref> FY14 growth rate was revised upward significantly, from 5% to 6.9% and the FY13 growth rate from 4.7% to 5.1%.<ref name=seekingalpha/>

Some critics of the new method also noted that the downward revision of nominal GDP adversely affected various economic risk ratios.<ref name=ceic/>

=== The growth rate of GDP ===

GDP growth rates under the new series appeared to be higher than they had been under the old series; however, ''per'' the preceding section, this increase was achieved because the estimate of GDP level for previous years was ''lower'' in the new series than the old.<ref name=ft/>

Initially, there was a lack of data points released with both the old and new methods for a meaningful comparison (specifically, the new series was not extended back in time so that its differences with the old series could be better understood).<ref name=ceic/> A number of people were critical of CSO for not providing this data.<ref name=worstall-sensible/><ref name=fsg/><ref name=businesstoday/>

The increase was considered suspicious by commentators who noted that other indicators (such as tax revenues) seemed to show a slowdown in economic growth, suggesting that either the role of the informal, untaxed sector was increasing fast, or some of the data was wrong.<ref name=reuters/>

== See also ==

* [[2010 Ghana GDP rebasing]]
* [[2014 Nigeria GDP rebasing]]

== References ==

{{reflist|30em}}

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[[Category:2015 in Indian economy]]

2015 India GDP rebasing - Revision history

MetaBOT at 18:37, 8 July 2023