Meaning of National Account Rebasing

The Rebasing of National Accounts also called re-benchmarking of the national account series or gross domestic product (GDP) is the mechanism of replacing an old base year used to compile volume measures of GDP with a new and more recent base year or price structure. Economic analysis deals with the study of dynamic economic activities thus economic analysis is dynamic. Economic activities over time grow, may shrink, new activities may present, new products may come into the market, new technologies may introduce, and new tastes and preferences may present. It means the economy may grow, or shrink, embrace new sectors, new products, and new technologies, and consumer behavior and tastes change over time.

Rebasing or Re-benchmarking is the process of accounting for such changes to give a more current picture of the economy, as well as improve the coverage of economic activities included in the GDP compilation mechanism. Identification of the base year provides the reference point to which future values of the GDP are compared. It is a normal statistical procedure undertaken by the national statistical offices of countries to ensure that national account statistics present the most accurate reflection of the economy possible.

Features of Rebasing of National Account

• Rebasing the National Accounts is an act of replacing the existing or old base year considered in the calculation of the current National Accounts with a new and more recent base year for computing constant price estimates/real estimates.
• It implies changing the price and quantity base for the individual price and quantity relatives
• It is the process of updating the weights used in aggregating the individual quantity relatives into sub-indices and to aggregate these sub-indices into more aggregated indices
• It is the process of changing the reference period for the individual price and volume
• The most important feature of rebasing is that it does not change any economic facts rather it measures them better. 
• Rebasing the measure of national accounts makes it a more reliable measure of economic structure and growth and ensures timelier and more informed economic policy decisions.

Objectives of Rebasing

The major objectives of rebasing are listed below.

• To implement the recommendations of the new system and standard of the system of national accounts (SNA)
• To adopt a new classification of economic activities as per International Standards Industrial Classification-ISIC
• To increase the coverage of economic activities by including new economic undertakings
• To adopt a new basis and methodology for computing GDP
• To ensure timelier and informed economic policy decisions

Use of Rebasing of National Account

• The rebasing helps to enable policymakers and analysts to get a more accurate set of economic statistics that is a truer reflection of current realities for evidence-based decision-making
• It also reveals a more accurate estimate of the size and structure of the economy by incorporating new economic activities that were not previously captured in the computational framework
• Rebasing enables the government to have a better understanding of the structure of the economy, an indication of sectoral growth drivers, and sectors where policies and resources should be channeled to grow the economy, create jobs, improve infrastructure, and reduce poverty
• It helps to embrace the structural changes that occurred in different sectors of the economy
• Rebasing helps to update available data and statistics of the national economy

Rebasing in the Case of Neal

The Central Bureau of Statistics (CBS) the central statistical organization of the government of Neal has been publishing national income aggregates since 1964-65 regularly. So, 1964/65 was the first base year of Nepal. The base year was shifted to 1974/75, 1984/85, 1994/95, 2000/01, and the fifth rebasing has set the base year as 2010/11. Thus, the current base year after the fifth rebasing s 2010/11.

Rebasing the National Accounts is thus an act of replacing the existing base year used in the calculation of the current National Accounts with a new and more recent base year for measuring constant price national statistics. The practice of rebasing is taken as an opportunity to observe and address the limitations regarding methodology, definitions, and source of data. The most important benefit and feature of rebasing are not changing any economic facts but rather measure them better. Likewise rebasing the measure of national accounts makes it a more reliable measure of economic structure and growth and ensures timelier and informed economic policy decisions.