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2017-18 bad choice for new GDP base year, says former chief statistician Pronab Sen

Whatever is the new base year, it should be a normal year, not an abnormal one. 2017-18 had two shocks - fallout of demonetisation and implementation of GST

twitter-logo Joe C Mathew        Last Updated: November 8, 2019  | 16:14 IST
2017-18 bad choice for new GDP base year, says former chief statistician Pronab Sen
According to former chief statistician Pronab Sen, the base year should either be a year before or after 2017-18

Even as the Ministry of Statistics and Programme Implementation (MoSPI) is planning to revise the base year to calculate the gross domestic product (GDP) growth from the current 2011-12 to 2017-18, former chief statistician Pronab Sen said the choice of year may not be the best as that was the time when the country witnessed two major disruptions - fallout of demonetisation and implementation of goods and services tax (GST).

Sen suspects that the change in the base year to 2017-18 could see a downward revision in the GDP during prime minister Narendra Modi-led government's first tenure (2014-2019), especially in the post demonetisation year. The low base during the Modi government's first tenure will make, at least statistically, the current 2019-2024 term growth look better.

"Base change is always important, more so if you are a relatively dynamic economy, as in a dynamic economy if you don't change the base, you are not capturing the structural changes that are taking place in the economy, Sen said.

Also Read: Govt plans to announce new base year for GDP in next few months

In a discussion with Business Today, Sen, also the former chairman of National Statistical Commission (NSC), said that NSC had in the past made a recommendation that efforts should be made to try and change the base every five years to capture the changing dynamics of Indian economy. "But you can't have five years as a fixed position because the base year that you take should be normal, not eventful. Last time, 2009-10 was supposed to be the new base year, but 2009 turned out to be quite an abnormal year. The first global financial crisis affected us, and then the country suffered the worst drought in 40 years. Due to these two disruptive events in 2009-10, it was decided to consider 2011-12 as a base year. Going by five-year logic, it is assumed that 2016-17 should be the natural base. But, they are talking about 2017-18, which was just as abnormal due to two big shocks (demonetisation, GST) as 2009-10 was. As a professional, I can say that 2017-18 is not the right year for the new base," Sen explains.

According to Sen, the base year should either be a year before or after 2017-18. "2018-19 will be ideal because two critical data points, the consumer expenditure survey, and the employment unemployment survey, need to be made available. The employment unemployment survey data is available only for 2017-18, not 2016-17. You will have the 2018-19 data also. Although you may need to conduct another consumer expenditure survey for 2018-19, both data sets are available for 2017-18; the only issue is that it was an abnormal year.

Also Read:SBI report warns India's GDP growth may dip below 5% in September quarter; fiscal below 6%

On the new base year and its impact on existing growth numbers, Sen said that the current 8 per cent GDP growth rate of 2017-18 (based on 2011-12 base year) might come down dramatically under the new series. "So far we have not measured the unorganised sector in the revised base that is going to happen. When we go for the revised base, we have to take a full measure of the unorganised sector. If the unorganised sector has done as badly as we think, the growth is going to come down, but you will have high growth thereafter. So it will be a trade-off between Modi 1.O and Modi 2.O," he added.

Pravin Srivastava, Secretary, Ministry of Statistics and Programme Implementation, had recently stated that the government is actively looking at 2017-18 as the new base year for GDP. He said the consultations are on and a decision will be taken over the next few months.

Also Read: India Ratings cuts GDP growth to 6.1% for FY20

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