[Solved] Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015.

GDP is defined as a measure that expresses the economic value of a country’s economic activities. In other words, it is the market value of all the goods and services produced within an economy in a particular period. The National Statistical Office calculates the GDP figures (NSO). In 2015, a new series was launched to compute GDP by modernising the methodology and including new data sources in accordance with UN standards.

GDP Calculation Methodology Before 2015 GDP Calculation Methodology After 2015 
  1. The GDP was determined at the cost of a factor.
  2. The previous base year for GDP calculation was 2004-05.
  3. GDP was first computed using IIP data and then updated using ASI data in the previous methodology (Annual Survey of Industries). Only those businesses that were registered under the Factories Act were included in ASI.
  4. Manufacturing and trading activity was measured using the Index of Industrial Production (IIP).
  1. Market Price is currently used to calculate GDP.
  2. For GDP calculations, the government used a new base year of 2011-12.
  3. The government implemented the MCA-21 database, which allows businesses to file financial reports electronically.
  4. It was decided to use the international practice of evaluating industry-specific estimates as gross value added (GVA) at basic prices.

The new method is statistically more reliable than the previous one because it estimates a broader range of indicators, including consumption, employment, and company performance, as well as variables that are more responsive to recent changes.

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