No, I do not agree with this statement.
Index numbers can be constructed without the base year because :
- Index Numbers are the tools for measuring the changes in the magnitude of a variable or a group of variables over time with respect to a chosen year.
- Prices of some goods may increase and of other may decrease during the two periods. Index numbers solves this problem by taking the average change.
- For example, to know cost of living of people in general in India, Government chooses a base year 2010 which is taken as 100. Then cost of living is calculated in 2019 which may be 140.
- This difference of 40(140-100) shows that cost of living in India has increased by 40% since 2010.
Hence, Index Numbers cannot be constructed – without the base year.
