A base year is the year used for comparison for the level of a particular economic index.
A base year is normally set to an arbitrary level of 100. Any year can be chosen as a base year, but typically recent years are chosen.
New, more up-to-date base years are periodically introduced to keep data current in a particular index.
For example, to find that rate of inflation (or any other economic index) between 2005 and 2010, one would make calculations using 2005 as the base year, or the first year in the time set.
A base year change is a regular and methodological issue not limited to India only and almost all countries revise the base year of their national accounts.
The base year change is in line with the system of national accounts and the internationally agreed standard set of recommendations to compile measures of economic activity in accordance with strict accounting conventions based on economic principles.
Current Issues relate to Base Year :
According to the India Ratings (Ind-Ra),the revision in base year of India's national accounts will increase the size of the economy to Rs 111.7 trillion in FY 2014-15.
The size of the Indian economy was at about Rs 93.89 trillion in 2012-13.
The Indian economy to increase 6 % to Rs 111.7 trillion (USD 1.8 trillion) in FY14 from the earlier estimate with the change of base to FY12.
The National Statistical Commission has recommended changing the base year of National Accounts Statistics every five years.
According to Ind-Ra, the base year should be changed frequently in view of fast-changing economic structure as well as to update or estimate national accounts on the basis of latest available data.
However, the agency does not expect the change in base year to result in any significant change in GDP (Gross Domestic Product) growth rate.