Estimation of national account aggregates under the 2004–05 series and 2011–12 series: An analytical comparison

The revision in base year for GDP is a standard global practice to account for inter alia structural changes in the economy. However, the release of back series for the period 2004–05 to 2011–12 in India in November 2018 was mired with debates among academicians, politicians and media alike. This study focuses on explaining the methodological aspects of arriving at different estimates at the sub-sector levels under the latest base year revision of national accounts i.e., from 2004–05 to 2011–12 and dispelling doubts on few data issues which have been raised frequently in literature. For the purpose of comparison, we have considered the period 2004–05 to 2011–12 for which data is available in both the 2004–05 and 2011–12 bases. The compilation methodology for 201112 base year follows the recommendation of System of National Accounts (SNA), 2008 and hence comprises a significant methodological shift. There have been substantial updates/revisions in the back series data for the period 2004–05 to 2011–12, both at the aggregate and the sectoral level. It is observed that deflators in the new series are higher compared to the 2004–05 series, thereby leading to lower estimates of real macroeconomic aggregates. Secondly, the services sector underwent major downward revision in the back series. Although the most highlighting change in the 2011–12 base year series is incorporation of MCA21 database, the use of which was however, limited till 2010. Finally, the dynamic rolling window correlation analysis suggests that the relationship between GDP and various macro indicators have worsened overtime.