What's New :
Target PT - Prelims Classes 2025. Visit Here
What's New :

info@iasscore.in

8448496262

हिन्दी

GS Analyst: Daily Current Affairs

23rd September 2024 (9 Topics)
facebook sharing button
telegram sharing button
whatsapp sharing button
twitter sharing button
twitter sharing button Copy
2 Sep
3 Sep
4 Sep
5 Sep
6 Sep
7 Sep
9 Sep
10 Sep
11 Sep
12 Sep
13 Sep
14 Sep
16 Sep
17 Sep
18 Sep
19 Sep
20 Sep
21 Sep
23 Sep
24 Sep
25 Sep
26 Sep
27 Sep
28 Sep
30 Sep

On the pitfalls of estimating GDP

Context

India's GDP measurement is in discussion due to the proposed revision of the base year from 2011-12 to 2020-21, with the National Statistical Office considering the use of Goods and Services Tax (GST) data, raising concerns about accuracy and the need for validation amidst skepticism over past overestimations.

What is GDP?

  • Gross Domestic Product (GDP) is a key indicator of a country's economic size. It measures the total value of goods and services produced over a specific period and is used to compare economic performance across countries.
  • The GDP growth rate is calculated by comparing the GDP of one period with the GDP of a previous period.
  • Current Base Year and Proposed Change
    • The current GDP calculation uses 2011-12 as the base year.
    • A revision is planned to change the base year to 2020-21.
    • This change aims to better reflect economic conditions and improve accuracy.

Why Change the Base Year?

  • The National Statistical Office (NSO) is considering using Goods and Services Tax (GST) data instead of the current MCA-21 database, which records corporate financial data.
  • GST data is thought to provide a more comprehensive view of economic activity.
  • Challenges with the Current System
    • The MCA-21 database was introduced in the last revision but has faced criticism for overestimating growth.
    • Previous estimates showed a significant difference in growth rates between the new GDP series and older data, raising doubts about accuracy.
  • Concerns About Using GST Data
    • While GST data could enhance GDP estimates, its effectiveness is uncertain without thorough testing.
    • The NSO is urged to conduct pilot studies to validate GST data for specific industries and regions.
    • Transparency and independent verification of the GST data are crucial for establishing trust in GDP estimates.

Fact Box:

Calculation of GDP

  • GDP is calculated using the following formula:
                        Y = C + I + G + (X − M)
  • C = consumption (spending on services, non-durable goods, and durable goods)
  • G = government expenditure (salaries of employees, construction of roads, railways, airports, schools, and military expenses)
  • I = investment (spending on housing and equipment)
  • X-M = net exports (difference between total exports and imports)
  • In this context, Y represents the Gross Domestic Product.

Base Year

  • The base year serves as a reference point for measuring changes in economic variables and comparing the relative performance of indicators over time.
  • For example, real GDP growth is currently calculated with reference to FY12 prices.
  • Currently, key economic measures like the Index of Industrial Production (IIP), Wholesale Price Index (WPI), and National Income are anchored to FY12, previously benchmarked to FY05.
  • The last change in the GDP computation base year, from FY05 to FY12, improved coverage of financial corporations, local bodies, and autonomous institutions and included methodological changes.

More Articles

The Quad’s agenda may seem small, but its achievements are not
International Relations International Organization
India needs a 'National Security Strategy'
Security Internal Security
Why a grand GST bargain with states is needed
Economy Trade and Commerce
India’s first National Security Semiconductor Fabrication Plant
International Relations India-US
Rising atrocities against Dalits
Polity & Governance Governance
Food Safety in India
Polity & Governance Governance
Swachh Bharat Mission 2.0
Polity & Governance Government Schemes
India’s Rhino Conservation Success
Polity & Governance Government Interventions
X

Verifying, please be patient.

Our Center

Delhi (Karol Bagh) Centre

GS SCORE, Second Floor, Metro Tower, 1B, Pusa Road,
Karol Bagh, New Delhi - 110005 (Beside Karol Bagh
Metro Station Gate No. 8)

Email: info@iasscore.in

Phone: +91 8448496262

COURSES

TOPPER'S CORNER

RESOURCES

STATE PCS

ACTIVITY

POLICY

Still Have Questions?

84484 96262
Enquire Now