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India's Methodology in Line With Advanced Countries: Available at

The document discusses changes made to India's GDP estimation methodology in 2008 and 2011-2012. A committee formed in 2008 recommended two major changes: incorporating new data sources to replace old surveys, and aligning with 2008 System of National Accounts standards. The new methodology better reflects economic activity by accounting for differential worker productivity and updating sector weights using latest data. India's changes bring its GDP calculation in line with advanced countries, several of which also saw GDP increases after switching methodologies.

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58 views1 page

India's Methodology in Line With Advanced Countries: Available at

The document discusses changes made to India's GDP estimation methodology in 2008 and 2011-2012. A committee formed in 2008 recommended two major changes: incorporating new data sources to replace old surveys, and aligning with 2008 System of National Accounts standards. The new methodology better reflects economic activity by accounting for differential worker productivity and updating sector weights using latest data. India's changes bring its GDP calculation in line with advanced countries, several of which also saw GDP increases after switching methodologies.

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boltfan boltfan
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© © All Rights Reserved
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certain other changes, given better availability and reporting of data.

The process
of changing the GDP estimation methodology started in 2008 with the Advisory
Committee on National Account Statistics forming 5 subcommittees. Based on
recommendations made by sub-committees 2 major changes were accepted, (i)
Incorporation of MCA21 database in place of Annual Survey of Industries and
(ii) Incorporation of the Recommendations of System of National Accounts
(SNA), 2008.2 In addition, the following changes actually point out that the
calculation in new series is a far better reflection of reality than the old series,
• Differential productivity of workers: The old series assumed that all
categories of workers engaged in an economic activity contribute equally.
The new method addresses differential labor productivity issue by
assigning weights to the different categories of workers engaged in an
economic activity based on their productivity.
• Composition of various activities between the two series: The two series
differ in relative weights of various sectors. These weights change
primarily because of the availability of new data and better coverage. For
instance, the weight of Manufacturing was increased from 14.7% to
18.1%, while that of Trade, repair, hotels and restaurants was reduced from
17.4% to 10.8% in the new series. Now, in the old series of 2004-05, no
recent survey of unorganized trade enterprises was available for
incorporation and hence the estimates were based on the survey conducted
in 1999-2000. While in the 2011-12 series, this was updated with the
survey on ‘Unincorporated Enterprises’ conducted by NSS in 2010-11.

2. India’s methodology in line with advanced countries

2.1 Other countries have switched their GDP calculation methodologies as well
based on SNA, 2008. This switch led to increases in GDP in some OECD
countries, reductions in others. On balance, more countries had increases than
decreases. For example, on an average for OECD countries, there was
increase in real GDP of 0.7%. If there has been an increase in a country, that
doesn’t mean GDP numbers are false and untrustworthy. The reason is that
over time improvement in data sources help to expand the coverage of
activities, hence it should not be confused with over-estimation.

2
Available at:
http://www.mospi.gov.in/sites/default/files/press_releases_statements/Inform_no_base_year_revisi_NA10oct14.
pdf

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