Consider the following statements- 1. The Central Statistics Office of India calculates GDP at factor cost. 2. GDP at factor cost includes taxes and hence give a true picture of the economy. Which among the above statements is/are correct?
In January 2015, the government moved to a new base year of 2011-12 from the earlier base year of 2004-05 for national accounts.
In the new series, the Central Statistics Office (CSO) did away with Gross Domestic Product (GDP) at factor cost and adopted the international practice of valuing industry-wise estimates as gross value added (GVA) at basic prices. Hence, statement 1 is not correct.
The Gross Value Added is in conformity with the United Nations System of National Accounts (SNA) of 2008.
GVA is defined as the value of output minus the value of intermediate consumption.
It provides the rupee value for the number of goods and services produced in an economy after deducting the cost of inputs and raw materials that have gone into the production of those goods and services.
GVA at factor cost included no taxes and excluded no subsidies whereas GVA at basic prices will include production taxes and exclude production subsidies. Hence, statement 2 is not correct.
Ideally, the base year should be changed after every five years to capture the changing economy.
The government is planning to change the base year for Gross Domestic Product (GDP) calculations on constant prices to 2020-21.
A revision in the base year is essential for better policymaking. It is meant to track structural changes in an economy and improve or update macroeconomic indicators that reflect the economic performances of a country.
The decision of Advisory Committee on National Accounts Statistics is in view of the structural reforms in the economy and the likely availability of data through annual surveys such as consumer expenditure, annual surveys on incorporated sector enterprises and service sector enterprise, etc.