A base year is a reference point used in economic studies for comparative analysis. It acts as a benchmark for measuring changes in various economic indicators, such as price levels, commonly represented by the Consumer Price Index (CPI), and industrial production indices (IIP). This base year provides a stable reference to evaluate economic performance over time.
The government is updating the base year for CPI and IIP to 2022-23 as it marks the first 'normal year' following the pandemic. This period saw many economic indicators revert to pre-COVID levels, offering a more accurate perspective of current economic conditions.
By selecting 2022-23 as the new base year, the CPI and IIP will effectively reflect the economic recovery and growth that followed the pandemic. This alignment with the most recent and stable economic environment ensures the indices remain relevant.
The base year serves as a critical benchmark for assessing variations in price levels (CPI) and industrial production (IIP). An updated base year ensures these indices provide an accurate representation of the current economic landscape, facilitating better analysis.
The new base year of 2022-23 is expected to be implemented within two years, aiming for completion by FY27.
Updating the base year to 2022-23 will yield more relevant and accurate data, enhancing economic analysis and policy-making. This change will improve tracking of inflation and industrial growth, ultimately leading to more informed decision-making.
The Advisory Committee on National Accounts will be reconstituted to explore any necessary methodological changes for both CPI and IIP, alongside the base year revision. This committee will comprise representatives from government departments, statistical agencies, academic circles, and industry experts.
Q1. What is the significance of a base year in economics?
Answer: A base year is crucial as it serves as a reference point for measuring economic changes over time, ensuring accurate comparison of indicators like CPI and IIP.
Q2. Why is 2022-23 chosen as the new base year?
Answer: The year 2022-23 reflects the first 'normal year' post-pandemic, providing a more accurate representation of economic recovery and current conditions.
Q3. How does changing the base year impact inflation tracking?
Answer: Updating the base year ensures that inflation tracking through CPI aligns with the latest economic realities, improving policy-making and analysis.
Q4. When will the new base year come into effect?
Answer: The implementation of the new base year of 2022-23 is planned for completion by FY27.
Q5. What role does the Advisory Committee play in this change?
Answer: The Advisory Committee on National Accounts will consider methodological changes for CPI and IIP, ensuring that the revision process is comprehensive and informed.
Question 1: What is the primary purpose of establishing a base year in economic studies?
A) To measure historical data
B) To serve as a benchmark for comparison
C) To predict future economic trends
D) To establish government policies
Correct Answer: B
Question 2: Why is 2022-23 considered a 'normal year' for economic indicators?
A) It marks the end of the fiscal year
B) It follows the pandemic recovery phase
C) It has the highest GDP growth
D) It was an election year
Correct Answer: B
Question 3: Which of the following indicators was noted for robust performance post-pandemic?
A) Agricultural output
B) Industrial production
C) Export levels
D) Government revenue
Correct Answer: B
Question 4: When is the new base year expected to be fully implemented?
A) By FY25
B) By FY26
C) By FY27
D) By FY28
Correct Answer: C
Question 5: Who will be part of the reconstituted Advisory Committee on National Accounts?
A) Only government officials
B) Academicians only
C) Representatives from various sectors
D) Private sector stakeholders only
Correct Answer: C
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