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Macro indices inch closer to same base year

Macro indices inch closer to same base year

New Delhi: India’s key macroeconomic indices are inching closer to the common base year of 2004-05, which will make comparison of data much easier, given that the various benchmarks will be set to the same line on the grid.

The Central Statistical Organisation (CSO) will release the quick estimate of national accounts (gross domestic product, or GDP) for fiscal 2009 on 29 January with the new base year, discarding the previous one of 1999-2000, chief statistician of India Pronab Sen said.

“By and large, all statistical systems try to get the same base year. In our case, it is a little more difficult as different data series are being put out by different ministries and getting a common base year is not that easy," said Sen, who is also secretary, ministry of statistics and programme implementation. “The big advantage is you do not have to do ad hoc corrections."

The government is preparing the Wholesale Price Index (WPI) and the Index of Industrial Production (IIP) with the 2004-05 base year. GDP figures from previous years will be released with the new base year at a later stage, another ministry official said on condition of anonymity.

The economy grew at 6.7% in 2008-09, during which India was buffeted by the global economic crisis, according to the revised estimates for national income released by CSO last year. The official said it was unlikely that there would be much variation in the forthcoming quick estimate because of the base-year change.

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. The National Statistical Commission (NSC), under the chairmanship of C. Rangarajan, had recommended that the base year should be revised every five years.

Suresh Tendulkar, also a former chairman of NSC, said a recent base year is better than an old one because the Indian economy has grown at a faster clip in recent years. “A common base year would also be an ideal reference year. The database for all the weights will be the same in such a case," Tendulkar said. “One can draw better conclusions using a common base year; otherwise, one has to make adjustments." The impact analysis of such data will also be more meaningful, said Shubhada Rao, chief economist with Yes Bank Ltd. “With a common base year for all major indices, it will help in drawing meaningful inferences."

While a common base year makes comparing data sets easier, it does not make the data any more reliable, said another senior statistics ministry official, who also didn’t want to be named.

Indian macroeconomic indices, especially WPI and IIP, have long been criticized by analysts as well as policymakers as being outdated as they haven’t been revised in line with changing consumption and production patterns. P. Chidambaram, then finance minister, was among those who questioned the reliability of the data when IIP growth plunged to a 10-year low of 1.3% in August 2008.

The department of industrial policy and promotion (DIPP), which releases the monthly WPI-based inflation data, is also in the advanced stages of updating the current series with an expanded basket of commodities and the 2004-05 base year, starting in April, abandoning the current one of 1993-94. The revised index is expected to have around 700 items, up from 435 at present. DIPP recently obtained the approval of CSO’s technical advisory committee to release the new index. “Now we will take the approval of both the working committee under Planning Commission member Abhijit Sen, who first recommended a monthly WPI, and the committee of secretaries before the series is finally launched in April," a senior DIPP official said on condition of anonymity. The Union cabinet has already approved the proposal.

The much delayed revision of IIP to the 2004-05 base year has also reached its final stages with DIPP, the largest data source for the index, providing information to CSO, which releases the benchmark.

DIPP had earlier got private macrodata tracker, the Centre for Monitoring Indian Economy, for collecting information. “We have asked for some more data from DIPP and are waiting for the latest data on iron, steel and chemicals from the concerned departments," said the first statistics ministry official cited earlier. “If we get the required data by this month end, we will try to finish compiling the index by March end."

The current index with the base year of 1993-94 is widely considered to be outdated and unrepresentative of the factory production pattern because it includes many products that have outlived their relevance, such as typewriters, and does not include items whose importance has grown in recent years, such as microwave ovens and mobile phones.

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