Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC GS3 2021)
GDP is a measure primarily used as a yardstick to gauge the growth of an economy. In 2015, a new series was announced to calculate India’s GDP by upgrading the methodology with new data sources to meet UN standards.
Difference between old and new methodology:
Change in Base Year
Post 2015: 2011-12
Change of base year to calculate GDP is done in line with the global exercise to capture economic information accurately.
Change in data used to measure manufacturing sector growth
GDP at factor cost replaced by GDP at market price
Calculation of labour income
Change in the way value addition in agriculture was captured
Capturing income generated by Financial Sector
The new method is statistically more robust since it estimates more indicators such as consumption, employment, and the performance of enterprises, and incorporates factors that are more responsive to current changes.
Topics covered- difference between the method of calculating the GDP of 2015 before and after
|1. What is Gross Domestic Product (GDP)?
|2. How is Gross Domestic Product (GDP) calculated?
|3. What are the components of Gross Domestic Product (GDP)?
|4. What are the limitations of Gross Domestic Product (GDP) as a measure of economic well-being?
|5. How does Gross Domestic Product (GDP) impact the economy and policy-making?