Govt statistics to move towards common base year of 2004-05

In a shift that will make statistical comparisons easier and eliminate ambiguities in data, India is moving key macro-economic indicators to a common base year of 2004-05.

The Index of Industrial Production (IIP) and the Wholesale Price Index (WPI) currently have a base year of 1993-94. Gross domestic product (GDP) is measured using 1999-2000 as the benchmark year.

Work on shifting the IIP base year has already begun, while a new WPI data series based on 2004-05 prices is expected from the end of the year.

However, the GDP base year revision is expected to take more time. It was revised over two years ago, from 1993-94 to 1999-2000.

Pronab Sen, India's chief statistician, told Business Standard that since the existing base year of 1999-2000 for measuring national income is yet to stabilise, it would take some more time to move it to 2004-05.

"Most states are reporting data using the 1999-2000 base year. However, there are a few who are still using the old base year (1993-94)", he said.

In fact, had it not been for differences between the agencies concerned with the collection and dissemination of the data "" the Department of Industrial Policy and Promotion and the Central Statistical Organisation (CSO) "" the IIP base year would have moved to 1999-2000, to be in tandem with GDP.

Since the implementation has been delayed, the CSO is now looking ahead and has started work on shifting the IIP base year to 2004-05 along with expanded coverage and revised weights.

The real impact of a common base year, Sen said, was that it will eliminate the "confusion that arises out of using different base years for different economic indicators."

Abheek Barua, chief economist, HDFC Bank, says a common base year would make analysis easier. "I think the choice of 2004-05 is a good decision. I remember this particular year as a flat year without any sharp variations. That makes it an ideal base year."

N R Bhanumurthy, associate professor, Institute of Economic Growth, says it makes sense to have a common base year for all economic indices because it makes data more comparable.

FACT BOX

What is a base year?

It is a specific year used as a benchmark for measuring economic data.

How is a base year chosen?

A base year has to be a normal year without large fluctuations in production, trade and prices of commodities in general. Reliable price data should be available for the selected year. It should be as recent as possible. The National Statistical Commission has said the base year should be revised every five years and not later than 10.