Explain the difference between the computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (150 words) [2021]
The main differences between the old and new methodology for calculating India’s GDP are:
- The base year for calculation was changed from 2004-05 to 2011-12
- The data used to measure the performance of the manufacturing sector was changed from the IIP and ASI to annual accounts filed with the Ministry of Corporate Affairs (MCA 21)
- GDP at factor cost was replaced by GDP at market price, which includes product subsidies and taxes in addition to the cost of production
- The new series introduced the concept of “effective labor input”, assigning different weights to different types of labor (owner, hired professional, helper)
- The calculation of value addition in agriculture was expanded to include livestock and other factors beyond farm produce
- The coverage of the financial sector was expanded to include stock brokers, stock exchanges, asset management companies, mutual funds, pension funds, and regulatory bodies such as SEBI, PFRDA, and IRDA.
Overall, the new methodology is considered to be statistically more robust as it incorporates a wider range of indicators and factors that are more responsive to current changes in the economy.
