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Govt already planning new base year

Govt already planning new base year
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First Published: Wed, Jun 02 2010. 10 10 PM IST
Updated: Wed, Jun 02 2010. 10 10 PM IST
New Delhi: Work on a new base year will start the moment the government starts releasing key economic data such as the Wholesale Price Index (WPI) and the Index of Industrial Production (IIP) with 2004-05 as the reference point within a few months.
The National Statistical Commission (NSC), under C. Rangarajan, has recommended that the base year be updated every five years. Officials in the ministry of statistics and programme implementation (Mospi) say that as 2004-05 is already six years past, it needs to be updated quickly.
“As soon as we release the new indices with the base year 2004-05, work for a new base year will start immediately,” a senior Central Statistical Organisation (CSO) official said on condition of anonymity.
Government ministries are now debating whether 2009-10 will be an ideal base year. The department of industrial policy and promotion (DIPP), which releases the monthly wholesale price index, wants the base year to be 2009-10.
But the CSO official cited above said it wasn’t certain that 2009-10 would be the ideal reference point for constructing the indices.
“This was a year when the country faced a severe economic crisis and one of the worst droughts which impacted the farm output. We are thinking of making either 2010-11 or 2011-12 as the next base year,” said the official.
A final decision on the matter will be taken by the Standing Committee on Industrial Statistics under the ministry of statistics.
A DIPP official said that since the consumption expenditure survey by the National Sample Survey Organisation had already been carried out in 2009-10, based on which the weightage of various commodities in the WPI are calculated, the department favoured adopting 2009-10 as the base year.
“However, we will go by the final decision of Mospi,” added the official, who, too, didn’t want to be named.
Used as a benchmark for measuring economic data, a base year is selected by virtue of being a normal one without any wide fluctuations in production, trade and prices of commodities in general. Reliable price data should also be available for the selected year, which should be as recent as possible.
Suresh Tendulkar, the former chairman of NSC, the apex body on core statistics, supported 2009-10 as the new base year while accepting that it was a “difficult year”.
“The year 2004-05 was a year when change was beginning to happen. If you look at economic growth rate, it was not much different from 2009-10. If choice is between 2004-05 and 2009-10, then I would prefer the latter as it is a more recent one,” Tendulkar said.
India’s gross domestic product (GDP) grew 6.9% in 20004-05; GDP expanded 7.4% in 2009-10.
Tendulkar also said that while CSO can decide the weight basket of commodities used to compile IIP based on the annual survey of industry, deciding the weight basket of price indices such as wholesale and consumer price indices will have to wait another five years for the consumption expenditure survey results “if 2009-10 was not used as the base year.”
The CSO official said if 2009-10 is not made the base year, an interim consumption expenditure survey may have to be conducted in 2011-12 for the weight basket.
N.R. Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy, said 2009-10 wouldn’t make an ideal reference point given all economic indicators had been volatile in the year.
“2010-11 will be a more stabilizing year from the cost and price point of view. Hence, the ministry of statistics should plan for a consumption expenditure survey in this year to make it the base year,” Bhanumurthy said.
Asked about the release of IIP with the new base year scheduled for this month, the CSO official said that it may be delayed by another month.
“We are waiting for the views of the Planning Commission. We will send the note to the cabinet secretary, which will be then taken up by the committee of secretaries,” the official said.
DIPP is also in the advanced stages of updating the base year for WPI to 2004-05, abandoning the current one of 1993-94, and is currently carrying out a test run for the new series.
The revised index is expected to have around 700 items, up from 435 at present.
asit.m@livemint.com
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First Published: Wed, Jun 02 2010. 10 10 PM IST