A fixed period with which the value of a variable for the current period is compared, is called base year.
The following points should be considered while choosing it:
- The base year should be standard or normal.
- It should be free from natural calamities like floods, draught, earthquake, abnormal man-made events like war, revolt, riot, strike, agitation, political events, economic disturbances, etc.
- It should not be from a distant past.
- It should be so selected that reveal the realistic picture of the current situation.
- If a single period is not normal then it should be selected as the average of some past periods.