At this juncture when the General Elections have been officially announced in the

country, I feel it is propitious to prepare a ‘Profit & Loss Account’ & ‘Balance
Sheet’ of last 5 years. In a democratic apparatus like ours, it also becomes pertinent
to conduct a comparative analysis so as to conclusively & rationally pronounce,
“Who performed better”?
I shall try to portray a comprehensive picture with facts & figures thereby reducing
substantially the chances of entry of any political subjectivity.
Since the purview of analysis covers a wider span & multiple dimensions,
therefore I decided to critically examine it in segments.
The widely contentious & therefore discussed much in past i.e. “Economic
Progress” is something with which I would commence this piece of writing.
The primary controversary that broke out was alleged “fudged GDP numbers”.
I would hereby do the post-mortem of this claim in a layman’s language.

What does GDP Growth actually mean; it is nothing but money value of addition
of goods & services to an economy in a given time-period. Further GDP is
categorised into two parts:
1. Real GDP (Inflation adjusted)
2. Nominal GDP (Inflation included)

▪ Change in Base Year: Until 2015-16 GDP was calculated at 2004-05 Base
Price, however since 2016-17 the new base year i.e. 2011-12 has been
adopted by the current NDA government. Now, the question arises is this
decision an “obfuscating measure”? Well, the answer isn’t YES as long as
govt. revises the GDP figures of past years retrospectively so as to normalize
the “periodical anomalies” arising out of the discussed change, for
comparing the two given tenures. Also, this periodical change helps assess
the actual performance of the economy. Economists suggest that every fifth
year this change should be done to reflect the true state of economic growth.
This change of ‘Base Year’ is known as ‘Rebasing’ in economic terms.
CALCULATION OF GDP

Let’s assume for the sake of easy understanding that a hypothetical Economy ‘H’
produces 10 KG of milk in 2015-16 which continues to remain the same in 2016-
17 as well.

The rate is ₹20/L in 2004-05 which rises to ₹30/L in 2011-12.

GDP (2015-16) GDP (2016-17) GDP Growth (%)

10L×₹20 = ₹200 10L×₹30=₹300 50%

It is evident from the above example that there is no change in actual production
(No addition of flow of goods & services to the economy) in Economy ‘H’ but the
GDP growth is as high as 50%! “₹300” is “better” result however “50%” is purely
illusive unless the Gross Domestic Product of ‘Previous Year’ is adjusted with the
‘New Base Year’. If GDP (2015-16) is adjusted the outcome would be:
10L×₹20=200; thereby there being NO effective change in actual growth.
Conclusion:
This change better reflects the state of economy. Imagine practically the milk rate
being constant between the two given periods!
Remember comparing the two period would yield misleading results unless the
previous year is adjusted with ‘New Year Base’ price.