Why in the News?

The Government has decided to update the base year for compilation of Gross Domestic Product (GDP) from 2011-12 to 2022-23. An Advisory Committee on National Accounts Statistics (ACNAS) comprising of representatives from Central and State Government, Reserve Bank India, Academia and Researchers has been constituted for identification of new data sources and to advise on the methodology for compilation of National Accounts Statistics in the revised series.

What is GDP?

• It measures the monetary value of final goods and services produced in a country in a given period (say a quarter or a year).  
• It counts all of the output generated within the borders of a country. 
• GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. 
•  An alternative concept, gross national product, or GNP counts all the output of the residents of a country.  
• For example, if a German-owned company has a factory in the United States, the output of this factory would be included in U.S. GDP, but in German GNP. 

What is GDP?

• It measures the monetary value of final goods and services produced in a country in a given period (say a quarter or a year).  
• It counts all of the output generated within the borders of a country. 
• GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. 
•  An alternative concept, gross national product, or GNP counts all the output of the residents of a country.  
• For example, if a German-owned company has a factory in the United States, the output of this factory would be included in U.S. GDP, but in German GNP. 

Components of GDP

What is Base Year?

• A base year is the reference year whose prices are used to calculate the real growth (minus inflation) in national income. 
• A base year is used for comparison in the measure of business activity or economic or financial index. 
• A base year can be any year and is chosen based on the analysis being performed. 
• The base year can also describe the starting point from a point of growth or a baseline for calculating same-store sales. 
•  For example, to find the rate of inflation between 2016 and 2024, 2016 is the base year or the first year in the time set.