Publication of National Accounts Statistics and Press Releases (Para 13.1.28)
The Cabinet Secretariat or a similar high-level authority at the Centre and in the States should impress upon the source agencies to supply the requisite basic data for National Accounts Statistics (NAS) in a timely and reliable fashion by minimising delays and major revisions.
The National Accounts Division (NAD) of Central Statistical Organisation (CSO) should explicitly announce the time-table of release of NAS and strictly adhere to it.
The NAD of CSO should explicitly provide clarifications for the large differences (magnitude to be specified) from one revision to another for the same year in the sectoral and aggregate estimates along with the mention of the source agencies concerned.
The list of such source agencies causing delay/major revisions be notified to the apex technical agency, National Commission on Statistics, which would be in charge of supervising and monitoring the statistical system, for information, appropriate action and devising institutional correctives.
Overview of the Indian System of National Accounts (Para 13.2.10)
Urgent steps be taken to revive and restore the legitimate role of NAD of the CSO in providing technical leadership, guidance and coordination in the compilation of National and Regional Accounts.
Steps be taken to activate the institutionalised interaction between NAD of CSO and State Directorate of Economic and Statistics (DES) through periodical meetings to discuss the weaknesses in data and problems, and difficulties emerging from the foregoing detailed discussion of NAS and chalk out mutually agreed programme for improving the reliability, timeliness and credibility of the Indian System of National Accounts.
The meetings be used to impress upon the States to carry out State level annual/benchmark surveys keeping in view the needs of the system of National accounts.
Priorities in carrying out the benchmark sample surveys be worked out keeping in view (a) the share of the concerned aggregate/sub-aggregate in the total at the State/National level and (b) urgency of updation in terms of the year, of last survey, used in the estimation.
In line with the decentralised character of the Indian Statistical System, the States should develop the necessary survey organising capabilities.
Gross Domestic Product (Para 13.3.72)
Recommendations in chapter 4 to 12 in respect of Official Statistics relating to different sectors of the economy be implemented speedily so as to improve the quality of data going in to the compilation of National Accounts Statistics from primary source agencies.
The major weakness lies in estimating the contribution of the large number of unorganised and small self-employed enterprises in manufacturing and services, where the basic problems are those of irregular income streams, multiple activities undertaken during a year, absence of business accounts, and frequent entries and exits of units. While benchmark enterprise surveys currently provide the available database, the characteristic features mentioned above pose formidable challenges of survey design, survey methodology and survey practices. It is therefore recommended that, periodical benchmark surveys of unorganised enterprises be continued while simultaneously conducting pilot studies for improving the technical survey design methods and practices.
For updating rates and ratios used in GDP estimation by industry of origin, it is recommended that type studies (see Appendix 13.1 in Volume II) in different parts of the country, to provide reasonably representative estimates at the National level, be conducted regularly with the help of State Directorates of Economics and Statistics.
Private Final Consumption Expenditure (Para 13.4.9)
Existing weak areas in the estimation of PFCE relate to outdated basis for (a) marketable surplus ratios and wastage ratio in agricultural crops, fruit and vegetables and meat and meat products, (b) trade and transport margins, and (c) various rates and ratios. It is recommended that periodical and geographically dispersed type studies/case studies be carried out for continual updation.
As part of the Study Group on non-Sampling Errors, Central Statistical Organisation (CSO) and National Sample Survey Organisation (NSSO) jointly carried out "Cross-validation Study of Estimates of Private Consumption Expenditure Available from Household Survey and National Accounts" to bring out major sources of differences between PFCE from National Accounts and Consumer Expenditure from National Sample Survey. It is therefore recommended that studies be carried out to correct the item-level weaknesses noted in the Cross-validation Studies in both the sources so that discrepancies in the two estimates would be minimised.
The weakest link in the estimation of Private Final Consumption Expenditure (PFCE) has been the indirect coverage of the Non-profit Institutions Serving Households (NPISHs). It is recommended that periodical surveys/type studies be conducted to collect income and expenditure of NPISHs.
The sampling design of the annual consumer expenditure surveys carried out by National Sample Survey Organisation NSSO be examined with a view to (a) reducing sampling error of the annual estimate and (b) assessing the feasibility of obtaining sub-round-wise estimates for quarterly estimation.
Government Final Consumption Expenditure (Para 13.5.4)
The major data gap in the estimation of Government Final Consumption Expenditure (GFCE) being with respect to local bodies, it is recommended that the State Directorates of Economic and Statistics (DESs) analyse the budgets of the local bodies every year for estimating all the National accounts aggregates including GFCE.
Saving and Capital Formation (Para 13.6.18)
The problems in the estimation of saving and investment of the private corporate sector have been traced to the doubts about the representative character of the sample companies and inadequacies in the blow-up factor. It is recommended that corrective steps contained in the recommendations in Chapter 12 of the report on the Corporate Sector be implemented speedily.
The second major weakness in the estimation of saving and investment relates to the indirect residual estimation of savings in the form of physical assets undertaken by household enterprises and own-account un-incorporated enterprises for which decennial all-India debt and investment surveys provide benchmark estimates. It is therefore recommended to (a) examine the feasibility of reintroducing the receipts and disbursement block with last 365 days as a reference period as was the case with the National Sample Survey integrated household schedule from 1964-65 (19th round) to 1970-71 (25th round) in the current annual surveys of household consumer expenditure; and (b) experiment with the survey methodology for improving the estimation of capital formation from the enterprise surveys.
Various rates and ratios are used in the estimation of Capital Formation in construction, machinery and equipment and change in stock as also in the estimation of trade and transport margins. It is recommended that necessary type studies (see Appendix 13.2 in Volume II) to update them be carried out in a geographically dispersed fashion.
The following observations which appeared in the Chelliah Committee Report are still valid and need attention of the concerned agencies for implementation:
A reasonably expeditious system needs to be evolved to reduce the time lag in making available the flow of funds accounts.
Dissemination of details of capital financing separately on foreign direct investment, domestic investment and borrowing, retained earnings of foreign controlled rupees companies and branches of foreign companies in National accounts.
The Perpetual Inventory Method of preparing the estimates of Consumption of Fixed Capital may be reviewed periodically for assumptions made regarding the average life of various assets.
All States should compile estimates of total capital formation.
Public sector information in respect of local bodies should be improved. States need to make arrangements for consolidation of statistics from the annual statements of receipt and expenditure in respect of their local bodies.
For improving the estimates of saving and capital formation for the corporate sector, the top 1500 companies (out of over 3 lakhs companies) which would account for a predominant proportion of total saving/capital formation should be covered on a census basis. For the remaining companies estimates may be built up on a sample basis.
The flow of funds data should be used for estimating household saving in the form of currency. For the years for which flow of funds data are not available, the average ratio for the past three years should be applied.
Consumer credit extended by banks and non-banking financial companies should be shown separately in the National Accounts Statistics.
Feasibility of conducting independent income expenditure surveys on a periodic basis should be explored for validation of the estimates generated by Central Statistical Organisation through residual method for the household saving in the form of physical assets.
Present All-India Debt and Investment Surveys (AIDIS) covers only households. Entire household sector includes unincorporated enterprises and non-profit institutions as well. To obtain the estimates of complete household sector, Enterprise Surveys on the lines of AIDIS may be designed and conducted periodically preferably every five years.
In the case of deep discount bonds and zero coupon bonds, interest accruing needs to be spread out.
All new financial instruments such as warrants which are traded apart from the underlying securities to which they are linked should be taken into account in the estimation of saving as and when complete relevant data become available.
Software and database, which are purchased from the market by the business enterprises should be treated as part of capital formation. However, the increase in productivity of the existing software due to development of utilisation techniques should not be treated as part of capital formation.
Guidelines for Bridging the Data Gaps in Regional Accounts (Para 13.7.7)
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/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/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 DESs should 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.
United Nations – System of National Accounts 1993
Extended Production Boundary (Para 13.8.6)
For covering the production of goods within households for own consumption, the NSS consumer expenditure surveys need to account for these separately. Production of services by the households for their own consumption is not to be covered in the GDP estimates. However, output of services produced with the help of domestic servants, who are members of households need to be accounted in the GDP estimates. This might be quite difficult to capture separately in the present statistical system. The valuation of such services may be imputed on the basis of the value of output of domestic servants, who are Own-account enterprises in their own right.
Regarding concealed and underground production, many activities are covered implicitly, through the various approaches followed in the estimation of GDP. For example, in the case of agriculture, illegal crops are implicitly covered under the miscellaneous category "area under other crops"; in the case of firewood, the production estimates are made through consumption approach; in the case of construction, through commodity flow approach; and in the case of unorganised sectors, through the employment approach. The indirect approach of estimation currently followed should be continued, as direct survey of concealed and underground production is not possible.
Saving and Capital Formation (Para 13.8.12)
Type studies should be conducted on extended asset boundary to capture the necessary data like Cost of transfer of capital assets from one unit to the other unit; copyrights/patents, film originals, books and artistic originals; Defence expenditure on capital assets like vehicles, construction of buildings for office, hospitals, schools, roads, airfields, etc. which could be used for civilian purposes; Expenditure on purchase of software, databases, etc; and, information on valuables like: precious metals (non monetary gold if used as store of value) and stones, antiques and other art objects.
UN-SNA 1993 recommends that trees, which are repeatedly used to produce valuable goods, are to be taken as cultivated assets. It is recommended that the item, trees which are used repeatedly or continuously to produce product, such as fruits and rubber, be treated as capital formation.
The originals of films/books/research/artistic work, identified by copy rights/patents, need to be taken as a part of capital formation. The research and development expenditure should not be capitalised, when research succeeds, it results in new copy rights/patents which in turn get included in capital assets.
Defence expenditure on capital equipment such as radar, satellite launching system and vehicles, construction of buildings for offices, hospitals and schools, etc. and other construction works like roads, air fields, docks which are useable for civilian purposes, should be considered as part of gross capital formation as per UN-SNA1993.
Institutional Sector Accounts, and Sequence of Accounts (Para 13.8.13)
Efforts should be made to develop suitable frames for non-financial corporations, households and non-profit institutions serving households and collect information on regular basis on their income and expenditures.
With regard to extended production and asset boundaries, as and when new estimates are introduced for extended production and extended assets (in relation to the existing boundaries in UN-SNA 1968), they be indicated in separate rows and not merged with the estimates in order to maintain UN-SNA1968 consistent boundaries, so as to maintain inter-temporal comparability of National Accounts aggregates.