1. Economy could be 6% bigger in FY14 with change in base year

Economy could be 6% bigger in FY14 with change in base year

The size of the economy in the 2013-14 fiscal could be roughly 6% larger than estimated earlier once the government changes...

By: | New Delhi | Published: January 29, 2015 3:35 AM

The size of the economy in the 2013-14 fiscal could be roughly 6% larger than estimated earlier once the government changes the base year for calculation to 2011-12 from 2004-05, as already proposed, according to a report by India Ratings & Research.

With the change in the base year, the gross domestic product (GDP) at current prices would rise to around R111,70,000 crore ($1.8 trillion) in FY14, it said. The government is expected to release the first revised estimate of national income, consumption, expenditure, savings and capital formation for FY14 with the new base year by January 31. Advance estimates of national income for 2014-15 would be announced on February 9.

Consequently, all indicators expressed as a ratio of the GDP would also witness downward revisions from the levels already reported for the last fiscal.

The fiscal deficit in 2013-14 is expected to fall to  4.3% of the GDP, against 4.6% announced earlier. Similarly, the current account deficit could dip to 1.6% of the GDP from 1.7%. Moreover, India would become a $3-trillion economy by 2019-20—a year earlier if the change in the base year is effected.

“The reason for the increase in size of the economy is the usage of more up-to-date information for these estimations. A higher change signifies the occurrence of a rapid change in the economy which the previous basket of goods and services and the weights used to estimate the size of the economy were not capturing correctly and vice versa,” the report said.

To present a more accurate estimate of the growth of the economy, the National Statistical Commission has suggested a change in the base year every five years. The country has so far changed the base year for the computation of the GDP only six times.

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