The base year of GDP is often changed after 5 year interval, the simple reason is new Production units enter/begin in the meantime or delivery of NEW goods and service starts.
Illustration through example:
Suppose in an economy only cow are production units, they give milk which is only good available in the economy.
We assume year 2000 as base year, in which 100 cow are accounted for 1000 litre of milk.
In 2010 , say milk available in economy is 2000 litre, the growth rate will be:
2000-1000/1000 * 100 = 100% (over base year)
In 2015, say milk = 2500 litre
Growth = 2500-1000/1000 *100 = 150% (over base year)
Now if we see our examples, in 2000 cow were giving 10 litre milk each,
In 2010, 20 litre and 25 litre for 2015. Obviously if we assume 2000 as base year for calculating GDP of 2015, it will show 1 cow giving 25 litre milk in 2015, whereas the reality seems otherwise. More cow entered into economy which remained unaccounted for the growth of production. Say 100 more cow entered till 2010.
If we assume 2010 as base year, in which 200 cow were giving 2000 litre milk, growth for 2015 = 2500-2000/2000*100 = 25% (over base year)
So reality change, now 1 cow gives 12.5 litre milk.
“Basically updated information seems more realistic, and give better perception.” Kindly note even if we do not change Base year, nominal value remains same. i.e 2000 litre milk in 2010 and 2500 litre in 2015.
Note: Growth in economy is popularly measured Year-over-Year, i.e % increase in GDP number above last year GDP number.