The United Nations has developed the System of National Accounts (SNA/1993) for standardizing the national income accounting across the globe.

The National Income Accounts (NIA) are comprehensive, consistent and flexible set of macro-economic accounts based on internationally agreed concepts, definitions and accounting rules.

The NIA statistics are compiled by the countries to meet the needs of governments, private analysts, policy makers and decision takers. The major use of these statistics are to assess how a country's economy is growing or contracting over short to medium term.

The economic and financial analysts are particularly interested in the behaviour of an economy at various stages in the economic cycle. It is quite common to see analyses that compare the extent to which an economy has emerged from a recession compared with that of earlier stage.

The changes over time as observed in the current price estimates depict a combination of a change in prices and a change in the underlying volumes. Therefore, compilation of estimates adjusted for the effects of price change (i.e. constant price or "volume" estimates) is an important component of any national accounting system.

It is also a fact that structural changes take place in the patterns of production, consumption and investment in an economy. The relative prices of various products also subjected to various changes in the economy over a period of time.

The last decade of the 1990s was a period of drastic changes on international horizon. The change and persistent change has become the most sustainable commodity across globe.

Due to continuous developments and innovations during the last fifty years a lot of new products appeared in the market and because of obsoleteness many old products disappeared from the market.

Drastic quality changes also resulted in the non-comparability of goods and services between far apart periods. Furthermore on the final demand side as well structural changes do appear in the consumption patterns and utilization and acquisition of capital goods.

All these factors justify that it is absolutely desirable to rebase the national accounts series periodically. As changes in the structure of production or consumption appear almost continuously, it is more desirable to do rebasing frequently for capturing the structural changes in the economy and thus for reaching near to ground reality.

An important question is how often the base period should be changed. Practices in this respect vary considerably, with some countries keeping the same base period for as many as 10 years or five years, and some changing the base period every year.

It is desirable to change base periods frequently, especially in times of large changes in relative prices and rapid economic development. It is noteworthy that change of base year has an impact on the growth rates of components of the GDP.

Normally relative prices tend to change in a way that is inversely related to changes in relative volumes (i.e. the commodities for which prices become cheaper tend to have a higher volume growth). As a result, the overall measure of growth will tend to overstate the growth because when constant price estimates are rebased, the growth rates observed for major aggregates will change from those, which were based on, an earlier base year.

Sometimes the changes can be very significant, which can lead to problems for national accountants in trying to explain why the constant price GDP growth rates have been "revised" compared with those previously published.

Most countries in the Asian region are still using the system of fixed base years on which they compute their constant price growth rates. Generally the base years are changed after five or 10 years.

In the Asian region, the countries that have been regularly updating their national accounts series fall into three groups. The first group comprise Bangladesh, Cambodia, India, Indonesia, Republic of Korea, Nepal, Sri Lanka, Thailand and Vietnam who have rebased their series once or twice since 1980s.

The second group consists of countries that have linked their constant price GDP series. These are, Hong Kong, China, Philippines, Singapore, and Taipei China. The third group consists of those countries that had long overdue need to rebase their series for example Bhutan, Malaysia and Pakistan and the later two have recently rebased their series. Rebasing can be done more frequently. A minimum of five-year interval is advisable for rebasing.

As opposed to international practice, as well as that followed in the Asian region, Pakistan has delayed rebasing of its national accounts for over two decades. As such, many structural changes which have taken place since 1980-81 until 1999-2000 in production and consumption have not been captured.

It implies that our national accounts statistics were grossly under-reported. During this period complexion of Pakistan economy had changed from an inward looking centrally planned economy to an outward looking market economy.

It is interesting to note that the first estimates of the National Accounts were prepared in 1949 with 1949-50 as the base year and the national accounts were rebased after ten years with 1959-60 as the new base year. And since then the rebasing was in the doldrums.

In 1988 after extensive deliberations the accounts committee approved the change of base from 1959-60 to 1980-81. Again the rebasing exercise was undertaken several times but due to one reason or another it was not materialized.

The Annual Plan Coordination Committee (APCC) in March 1997 considered this issue and recommended to improve and rebase the Pakistani accounts and make the GDP and investment figures more realistic. It was only in December 2003 that the National Accounts were rebased from 1980-81 to 1999-2000.

The latest rebasing is different from the previous one in a sense that it has only four years old reference/base year while the previous rebasing had eight years old reference period.

There had occurred numerous structural changes between two reference years. Consequently, the coverage of data has engulfed a new range of products, enterprises and economic activities (like IT, courier services, travel agencies, mobile phones, etc.) in new rebasing.

The large-scale manufacturing sector was the greatest victim of keeping older base year because the picture was completely misleading in the case of manufacturing.

The large-scale manufacturing has now been estimated according to the Census of Manufacturing Industries of 2000-01 instead of 1980-81 and the number of manufacturing items has been increased from 91 to 100. The statistics of large-scale manufacturing has become more representative and the weights in the Quantum Index of Manufacturing (QIM) are near to reality.

The rebasing has implications for Gross Domestic Product (GDP) and per capita income too. The estimates of GDP for 1999-2000 have improved from Rs2952 billion to Rs3529 billion, showing an increase of 19.5 per cent over the estimates of 1980-81 base.

Even the estimates of the agriculture sector have improved by 18.5 per cent which shows that the value addition in the agriculture sector witnessed structural changes during the past two decades.

The estimates for overall industrial sector have shown improvement of 18.0 per cent while the improvement in the services sector was the most significant as it shows an improvement of 21.8 per cent over the old base.

The per capita income has been estimated at Rs27234 ($526) for the re-based year 1999-2000 compared to Rs22811 ($441) on the basis of the 1980-81 base. The patterns in capital formation has shown drastic changes as estimates of fixed investment have improved by 34.3 per cent to Rs607 billion over 1980-81 based estimates of Rs452 billion, mainly due to improved coverage. The Table below shows how rebasing has made drastic changes in production and capital formation in various sectors.

The massive change in the value addition and capital formation between the two periods shows the gross under-reporting of the size of the economy. Keeping the old base for 20 odd years has defaced the face of the Pakistan's economy.

It is unfortunate that rebasing the accounts from 1980-81 to 1999-2000 is only the third rebasing in the country's fifty years of economic history. There may by numerous economic activities which are still to be covered in the national accounts in the wake of rapid economic development and scientific and technological (especially IT related) changes taking place at fast pace but this could not undermine the importance of rebasing at this crucial juncture of our history.

Newly emerging economic activities especially in the field of virtual economy pose yet another challenge to our national accountants. The good thing about rebasing is that the National Accounts Committee (NAC) has already decided that the accounts should be regularly rebased after every five years and the next rebasing should now be carried out in 2004-05.

Our next door neighbour India has also decided to rebase their economy after every five years. True is the fact that the national accounts numbers are different from cricket score-cards because they are subjected to various assumptions and estimations.

However, the national accounts estimates should be near to truth. Pakistan is now well placed among the comity of nations due to its improved per capita income.

When India rebased its national accounts from 1980-81 to 1993-94, its improved statistics boosted its stature in the international horizon and "Shining India" type of rhetoric is the culmination of this boost-up.

There are many short-comings in the statistics collection, processing and presentation; however, we have to live with it. Over the years efforts were made to make it in conformity with international standards.

We have made significant headway in our limited resources but still we need to do even more for presentation of credible and transparent statistics. A credible statistics is instrumental in development planning and economic development. Although it was too late but rebasing is an appreciable act on the part of the government.