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Base Year Concept in Banking

A base year is the year used for comparison for the level of a particular economic index. The arbitrary level of 100 is selected so that percentage changes (either rising or falling) can be easily depicted,

Changes in Base year,Why ?

After every 10 years there is change will be minimum 4% rise in price of items so base year has to be changed .

Formulas for changing Base year-

GDP growth rate = change in gdp/initial GDP * 100

GDP of any of the previous years is chosen as the initial GDP and the year that is chosen is known as the base year.

Suppose India’s GDP is Rs. 100 and base year is 2000. Now, in 2015, many sectors such as IT, e-commerce, mobile telephony etc contributes to our economy, which were not present in 2000. Thus, India might be showing wrong GDP figures, since majority of economic activities driving sectors are not represented in Rs. 100. So, our govt. decides to change the base year to 2010. The revised base year will lead to all such sectors coming into play, and the GDP number will increase as the total output from these sectors will be added, which was not the case in 2000 base year.

For Example-

India GDP is rs-100 and the base year is 2000.

The change in base year-
A base year is the year used for comparison for the level of a particular economic index. The arbitrary level of 100 is selected so that percentage changes (either rising or falling) can be easily depicted. 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.

LATEST INDEX OF BASE YEARS-

RESIDEX -2007– real estate , housing

BANKEX -2002—- banking

STOCK MARKET – 1978-79— stock market

IIP- 2004-05—industries

CPI-IIW(industrial workers)- 2001-02

CPI-AL (agricultural labours)- 1986-87

CPI-RL (rural labours)- 1986-87

CPI-UNME(urban non manual)- 1984-85

CPI-RURAL – 2010

CPI-URBAN- 2010

RUPEE BASE YEAR- 1971

IAP(index of agricultural )- 2007-08

NSE- 1983-84

BSE- 1989-90

FTI- 1999-2000– foreign trade

NEER — REER- 1993-94

WPI- 2004-05

CPI – 2009-10(latest)

GDP -2011-12