Brief Background on the Compilation of Regional Accounts
13.7.1 The State Accounts statistics are an extension of the system of National Accounts to the regional level. These comprise of various accounts indicating the flows of all transactions within a time period between the economic agents constituting the State economy and their stocks. These accounts include various items like total output of the economy, the intermediate expenditure, States domestic product, factor incomes, consumption expenditure, capital formation, capital stocks and CFC.
13.7.2 The most important aggregate of the States accounts is the States domestic product (SDP) (States income). The States income can conceptually be prepared by adopting two approaches namely, income originating and income accruing. In the income originating approach, the measurement corresponds to income originating to the factors of production physically located within the geographical boundaries of States and represents net value of goods and services produced within the State. The income accruing approach, which relates to the income accruing to the normal residents of a State, provides a better measure of the welfare of the residents of the State. Due to a non-availability of data on inter-State flows of goods and services, compilation of estimates of State income on income accruing concept is not possible. Compilation of other aggregates and State accounts is also problematic, due to the absence of requisite data, particularly on the inter-State flows of incomes. These issues had been gone through by the Committee on Regional Accounts (RAC), set up by the Government in May 1972. The RAC submitted its First Report in 1974 and the Final Report in 1976. In the first report, the RAC recommended a set of Standard Tables mainly to meet the immediate requirements of the policy makers at the regional level. The committee submitted its second and final report to the Government in September 1976. In the final report, the Committee recommended a System of Regional Accounts (SRA) consisting of three consolidated accounts, mentioned below. The list of accounts and supporting tables of the system of regional accounts are indicated in Annexe 13.7. The reports also describe the concepts, coverage and method of estimation of various aggregates appearing in the Accounts and Standard Tables. Further the reports deal with major gaps in the existing data system and make recommendations for the collection of essential statistics required for satisfactory measurement of regional income and related aggregates and for the construction of the recommended SRA. The committee felt that an accounting framework for the States can be recommended, but there is little point in recommending one for regions smaller than States, like districts.
Consolidated accounts of the region
Income and outlay account
Capital finance account
Income and outlay account
Total consumption and income of the population
Accounts of State and Local Governments
Production account of State Government Departmental enterprises
Production account of State Government non-departmental enterprises
Income and outlay account of State Government administrative departments and departmental enterprises
Income and outlay account of State Government non-departmental enterprises
Capital finance account of State Government non-departmental enterprises administrative departments and departmental enterprises
Capital finance account of State Government non-departmental enterprises
Status of Implementation of the Recommendations of RAC
13.7.3 The State DESs under the advice/guidance of CSO and Advisory Committee on National Accounts, have been trying to implement the recommendations to the extent that data is available. The State-wise position of compilation of various accounts and supporting tables are given at Annexe 13.8, Annexe 13.9 and Annexe 13.10 respectively. The position of compilation of estimates of the district domestic product estimates is given at Annexe 13.11. The estimates of supra-regional sectors in respect of both the domestic product and gross fixed capital formation are allocated by the CSO on the basis of a set of indicators. A brief write-up on this is included at Annexe 13.12. In brief the progress of implementation of the recommendations of the RAC as follows:
All the States and UTs, with the exception of D and N Haveli, Daman and Diu and Lakshadweep, are preparing the estimates of GSDP and NSDP at current and constant prices.
The State/UT of Andhra Pradesh, Assam, Bihar, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal are preparing the SDP estimates by areas (districts) by commodity producing sectors only and out of which the States/UTs of Andhra Pradesh, Bihar, Haryana, Karnataka, Kerala, Maharashtra, Rajasthan, Tamil Nadu, and West Bengal prepare the district estimates for all the sectors. The State of Arunachal Pradesh is in the process of preparing district-level estimates.
The States/UT of Andhra Pradesh, Bihar, Goa, Gujarat, Himachal Pradesh, Karnataka, Kerala, Maharashtra, Orissa, Punjab, Tamil Nadu, Uttar Pradesh, West Bengal and Delhi are preparing the Economic and Purpose Classification of the Expenditure of Administrative Departments.
None of the States/UT except Tamil Nadu (that too only at current prices) is known to have been prepared the Consumption Expenditure.
None of the States are preparing input-out tables.
The States of Andhra Pradesh, Assam, Gujarat, Haryana, H.P., Karnataka, Kerala, M.P., Maharashtra, Meghalaya, Orissa, Punjab, Rajasthan and Tamil Nadu are preparing the estimates of Gross Fixed capital Formation (GFCF). None of the UTs are preparing the GFCF estimates.
None of the State/UTs appear to have been preparing the Consolidated Account of the Region and accounts for the Household sector. However, the States of Haryana, Himachal Pradesh, Kerala, Madhya Pradesh and Tamil Nadu are preparing the complete accounts of Public Adminstration and Local Bodies. Whereas the States/UT of Andhra Pradesh, Manipur and Rajasthan prepare the accounts of only Public Administration and the States/UT of Gujarat, Karnataka, Tripura and Pondicherry are preparing the Public Sector Accounts relating to administrative departments only.
Data Gaps in the Compilation of Regional Accounts
State Domestic Product
13.7.4 For the purpose of compiling the SDP estimates, the major data gaps appear to be the absence of certain key datasets at the State level namely,
Cost of Cultivation Studies for most crops
Index of Industrial Production
Wholesale Price Index
Consumer Price Index
Corporate Sector Statistics
Benchmark Surveys of Enterprises
Annual Surveys of Enterprises
Indicators to extrapolate the estimates based on five-yearly benchmark surveys
State Income, Disposable Income, Saving and Net Lending from Other Regions
13.7.5 The compilation of State income (following the income accruing approach) and other aggregates, requires data on inter-State flows of income and net lending from other regions, besides the estimates of consumption expenditure of households through the NSSO Quinquennial survey and non-profit institutions serving households (NPISH), which are not available even at the All-India level. At this juncture it may be difficult to collect the data on these items, with the exception of the consumption expenditure of households and NPISHs. Even for this aggregate, the approach followed for the All-India estimates (the commodity-flow) may not hold good at State level, as this approach again requires inter-State movement of goods and services.
Capital Formation, Capital Stock and Consumption of Fixed Capital
13.7.6 Currently, some States are compiling estimates of gross fixed capital formation (GFCF) by assets and industry for the public sector, while three States are also compiling the GFCF estimates for the Whole State economy. Since estimates of construction and machinery equipment are already compiled for the SDP estimates, it may not be difficult to compile GFCF estimates at State level, with certain assumptions. The CSO has provided necessary technical guidance from time to time on the compilation of GFCF at the State level. Once the States start compiling the GFCF estimates, a database on this could be developed, which in the long run, will be used for compiling the estimates of capital stock and CFC.
13.7.7 Guidelines for bridging the data gaps in regional accounts:
Cost of Cultivation Studies: The Cost of Cultivation Studies (CCS) is conducted by the Directorate of Economics and Statistics, Ministry of Agriculture (DESMOA) through the agricultural universities. The number of crops covered in each State is very few and the sample size (about 10,000) is too small to give reliable estimates. The time lag in the release of the results of these studies is of the order of 3 years. For generating the input structure of different crops in each State and UT, it would be desirable to conduct large-scale sample surveys on inputs of agricultural crops, by State Directorates of Economics and Statistics rather than the current practice of “studies”. This would enable coverage of most crops in all the States, a manifold increase in the current sample size and a reduction of the time lag in releasing the estimates with the help of computerisation.
Index of Industrial Production: Most States and UTs do not have a database on the industrial production in their States. The Annual Survey of Industries (ASI) is the only source of data on industrial activity in the States. As the ASI is annual and the time lag in the availability of its results being about two years, there is no data on the current industrial production scenario at State level. While there is an Index of Industrial Production (IIP) at the National level, the absence of a corresponding index for the States is a major data gap. The development and maintenance of an IIP by each State and UT would lead to an enormous improvement in the State Domestic Product estimates. The State/UT IIP could be used to prepare the Advance and Quick Estimates of SDP and would also act as a crosscheck to the ASI results. The States could consider using the frame/database of Directorates of Industries or/and the Central Excise or Sales Tax authorities. While the weights for different industry/commodity groups at State level could be taken from the ASI results, the monthly production figures collected either directly or from the database of the Central excise authorities, from a fixed sample (with suitable adjustments for new units, information on which is available with the above mentioned two organisations) would enable the States to have an IIP for their States.
Consumer Price Index: Most States publish State-level consumer price indices (CPI). All-India CPI for industrial workers and urban non-manual employees are based on CPI for various centres in the country from which price quotations are collected for this purpose. It is desirable for the States to review existing CPI or introduce State-level CPI (where none exists today) for the purpose of estimation of the State domestic product.
Corporate Sector Statistics: For most services sectors, the GDP estimates are derived separately for the corporate sector, on the basis of the RBI’s company finance statistics. The same source is also used for generating domestic product estimates for the corporate sector segment at the State level. However, the size of the sample is considered too small even at the National level to give reliable estimates at industry-group level. At the State level, the estimates are not considered scientific even at the aggregate level, much less at the sectoral level. If States manage to compile corporate statistics (the number of corporations may not be many in a single State) on the basis of the frame available with the Regional Registrars of Companies, even once in five years, the quality of SDP estimates will considerably improve.
Benchmark Surveys of Enterprises: Benchmark sample surveys of enterprises have been conducted about once during five years by Central Statistical Organisation (for directory enterprises) and National Sample Survey Organisation (for non-directory enterprises). A decision has been taken that the NSSO will carry out sample surveys for both sets of (manufacturing and service) enterprises. The States participate in these surveys with a matching sample. The results generated by NSSO are not designed to yield estimates of the State/industry group at the State level. If the Central and State samples could be pooled (copies of the filled-up NSSO schedules could be obtained from the NSSO Regional Offices located in the States) and analysed by the States, there would be a significant improvement in the quality of the SDP estimates that are based on these benchmark surveys.
Annual Surveys of Enterprises: The major data-gap in the Gross Domestic Product or the State Domestic Product estimates is considered to be the absence of annual surveys of enterprises (with the exception of registered manufacturing). This has also been so identified by the Regional Accounts Committee (RAC) in 1970s. However, due to various reasons (particularly attributable to lack of resources), the annual surveys of enterprises have not found a place in the statistical system of the country. However, it would be desirable to conduct these annual surveys of enterprises by using a fixed sub-sample of the benchmark sample (such a recommendation was also made by the RAC) and collecting information on about five items namely, employment, production/total receipts, salaries and wages, capital expenditure and changes in stocks. The problem of exits of the enterprises could be overcome by assuming that the proportion of exits in the fixed sample and the population is the same. For the new enterprises, which come into existence, a correction factor could be applied on the basis of information on the number of enterprises (for any segment of the enterprises for which such information is available) starting economic activity in the State, from the State Directors of Industries or the District Industries Centres.
Indicators to Extrapolate the Estimates Based on Five-Yearly Benchmark Surveys: Currently, for the purpose of preparing annual Gross Domestic Product and State Domestic Product estimates on unorganised manufacturing and services sectors, various physical indicators of activity are used to extrapolate the benchmark estimates (for example, in the case of unregistered manufacturing, the Index of Industrial Production). However, it is essential to have a reliable set of proxy indicators and ensure that data are available on them on annual basis. The introduction of annual surveys on enterprises, stated in the above para, would generate the database required for extrapolating the benchmark estimates.
Local Bodies: There are a large number of local bodies in each State and since they get grants from the State budgets and also generate their own resources (for example, municipalities), it is necessary that their budgets/accounts are analysed and expenditures properly accounted for in the State Domestic Product/Gross Domestic Product estimates, as also under other expenditure categories of National Accounts. Currently the estimates of local bodies are prepared on the basis of grants shown in the State budgets, which implies that resources generated internally by these bodies are not covered. At the Central Statistical Organisation (CSO) level, it is not possible to analyse the annual budgets of these local bodies’ and efforts have to be initiated only at the State level. Appropriate inclusion of local bodies’ expenditures in the State accounts will reflect a correct picture of the public sector component.
Capital Formation, Capital Stock and Consumption of Fixed Capital: The State Directorate of Economics and Statistics should start compiling the estimates of Gross Fixed Capital Formation (GFCF), on the basis of the guidelines provided by the Central Statistical Organisation (CSO) from time to time. Once the States start compiling the GFCF estimates, a database on this could be developed, which in the long run, would be used for compiling the estimates of capital stock and CFC. State DES may examine the guidelines in consultation with CSO for the compilation of capital formation, capital stock and CFC.
Appointment of Expert Groups: For developing the State accounts as recommended by the Regional Accounts Committee (RAC), it is necessary that an Expert Group is appointed in each of the States. These Expert Groups would oversee the methodological aspects of the compilation of State accounts and make suitable recommendations to the State Governments and also the Advisory Committee on National Accounts, from time to time. The States of Karnataka and Rajasthan have recently constituted Expert Groups to look into various aspects relating to the improvement of estimates of SDP and expenditure aggregates. Such expert groups must be constituted by other States as well. At present, the CSO looks after these issues in consultation with the Advisory Committee on National Accounts in respect of both National and State Accounts.
Need for Resources: Improvement in the quality of SDP estimates and other aggregates requires the introduction of various surveys and the development of database, besides the availability of adequate trained personnel. All these require resources. Importance needs to be attached to State income estimates. Without providing adequate resources, it may not be feasible for the States to come up with improvements in the State income estimates. In most States, only a skeleton contingent of staff have been given the responsibility of compiling the SDP estimates, which barely manages to put together the annual estimates. The State Income Units in various States must be augmented with qualified personnel. This could be done by the DESs by re-deploying the staff appropriately.
District Domestic Product: There has been an increasing demand for the estimates of the district domestic product (DDP) below the State level in the context of calculating district level human development index (HDI). The Commission would like to point out that (a) the DDP estimates, wherever currently available, cover mostly major agricultural crops only or at best commodity producing sectors covering agriculture and industry because of problems of data availability at the district level; (b) that available DDP estimates are calculated by income-originating (by sector of origin) method; (c) that conceptually, for HDI, what are needed are DDP estimates by the income accruing method in order to reflect district-level living standards; and (d) that currently available data do not permit calculation of DDP by the income-accruing method. It would be desirable to develop some appropriate indicators of the living standards at the village/block/district level. Techniques of small area statistics may be used to estimate these indicators on the basis of State/regional level statistics capabilities.