Why in news
- Former Chief Statistician Pronab Sen advocated running dual GDP series with both old and new base years for five years during national account revisions.
- National Statistical Office is scheduled to release the updated GDP back series and new base year series by December 2026.
What is Base Year Rebasing?
- Rebasing updates the benchmark year used for calculating real Gross Domestic Product to reflect structural changes in the economy.
- It captures newly emerging economic activities, updates price indices, and aligns output measurement with international standards such as System of National Accounts 2008.
The Double Deflation Challenge
- Double deflation measures real value added by deflating gross output using output price indices and intermediate inputs using input price indices separately.
- Implementing accurate double deflation requires comprehensive, high-frequency price data for both input and output baskets across sectors.
- Single deflation, currently used for several manufacturing and service sectors in India, deflates nominal gross output using a single price index like Wholesale Price Index.
Rationale for Dual GDP Series
- Running dual GDP series concurrently allows researchers, financial markets, and policymakers to compare historical growth trends without structural data breaks.
- It provides a clear audit trail to evaluate whether growth divergence stems from methodology changes or real economic shifts.
Key terms
Double Deflation
A method of calculating real value added by deflating output and intermediate inputs using separate, specific price indices.
Base Year
The reference point against which prices and physical volumes of economic output are measured to remove inflation effects.
Prelims facts
- Double deflation deflates gross output and intermediate inputs using distinct price indices.
Mains discussion
- Significance of accurate price deflators and input-output data quality in national income accounting.
Source: Economic Times