Question

What is the new methodology for calculation of GDP in India ?

Answer 1

■ New Methodology for Calculation of GDP in India :-

• Earlier domestic GDP was calculated at factor or basic cost, which took into account prices of products received by producers.

• The new formula takes into account market prices paid by consumers. It is calculated by adding GDP at factor price and indirect taxes (minus subsidies). It is in line with international practice and is expected to better capture the changing structure of the Indian economy.

• The government has also changed the base year for estimating GDP from 2004-05 to 2011-12. This has been done to incorporate the changing structure of the economy, especially rural India.

• Data for the new GDP series will now be collected from 5 lakh companies (against 2,500 companies earlier). Under-represented and informal sectors as well as items such as smartphones and LED television sets will now be taken into account to calculate the gross domestic product.

Green GDP :-

• Green GDP is a term used generally for expressing GDP after adjusting for environmental damage. When information on economy’s use of the natural environment is integrated into the system of national accounts, it becomes green national accounts or environmental accounting.

• The process of environmental accounting involves three steps viz. Physical accounting; monetary valuation; and integration with national Income/wealth Accounts. Physical accounting determines the state of the resources, types, and extent (qualitative and quantitative) in spatial and temporal terms. Monetary valuation is done to determine its tangible and intangible components. Thereafter, the net change in natural resources in monetary terms is integrated into the Gross Domestic Product in order to reach the value of Green GDP.

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Answer 2

What is the new methodology for calculation of GDP in India ?