Change in base year has GDP revised upward at 7.5%

New Delhi, Jan 31 | Updated: Feb 1 2006, 05:30am hrs
Indias economic growth for 2004-05 has been revised to an impressive 7.5% compared to the earlier estimate of 6.9%, thanks to a change in the base year used for calculations. The base year, earlier fixed at 1993-94, has been advanced to 1999-2000.

Interestingly, the change in the base year has taken place after a gap of six years instead of the usual practice of changing it every 10 years.

The revised gross domestic product (GDP) growth figure for 2004-05 is, however, still lower than the growth rate of 8.5% achieved in 2003-04, which remains the same despite a change in base year. Sources in the government said that this was purely coincidental.

According to the quick estimates of national income released by CSO on Tuesday, the 7.5% growth has been achieved due to impressive growth achieved by the manufacturing sector at 8.1%, construction sector at 12.5%, trade, hotels and restaurants at 8.1%, transport, storage and communication at 14.8%, financing, insurance, real estate & business services at 9.2% and community, social and personal services at 9.2%.

Agriculture, forestry and fishing sector, however, registered a low growth of 0.7% during 2004-05.

According to finance minister P Chidambaram, the 7.5% growth is creditable, as it was achieved despite a low growth in the farm sector. While congratulating the NDA government for achieving a growth of 8.5% in 2003-04, the FM tried to downplay it by pointing out that it was achieved on a low base of 3.8% and backed by a robust 10% growth posted by the farm sector.

He said that the GDP growth in 2005-06 was likely to be close to 7.5% as the rabi crop promised to be much better. Citing the increase in gross domestic savings from 28.9% of the GDP in 03-04 to 28.9% in 04-05, Mr Chidambaram said savings might have further increased in the current fiscal.