R2_servicesectorinIndia

8/8/2019 R2_servicesectorinIndia

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january 31, 2009 EPW Economic & Political Weekly40

i sv sto Outut Ovtmtd?an inquy

R Nagaraj

Indias services sector-led growth since the 1990s

remains a puzzle it has taken place at a low level of per

capita income, without a proportionate transformation

in the workforce, and amidst a deceleration in

agriculture and a stagnation in industry. This paper

argues that the output of services is perhaps

overestimated since computing value added in servicesand finding suitable price deflators for them is difficult

even in the best of circumstances. The answer to the

puzzle, therefore, lies (at least partially) in the

deterioration in economic statistics, and the use of a

widely acknowledged faulty methodology. More

specifically, services output seems overestimated due to

(i) the inflated estimate of the growth of the private

corporate sector, (ii) a slower rise in the services deflator,

and in particular (iii) of an overstatement of the declinein the prices of communications services.

I am grateul to Pranab Bardhan or his probing questions on my previous

paper on the recent economic growth that prompted the inquiry. I am

indebted to Ramesh Kolli or his detailed written response; and to

K L Krishna, D S Prasada Rao and Partha Ray or their comments and

suggestions on an earlier drat o the paper. I also thank the audience at

a seminar at the Centre or Development Studies, Thiruvananthapuram or

their sharp questions and criticisms. The usual caveats apply.

R Nagaraj ([email protected]) is at the Indira Gandhi Institute o

Development Research, Mumbai.

In 2006-07, services (tertiary) sector contributed 55% o Indias

real gross domestic product (GDP) at actor cost, having grown

annually at 8% since 1990-91, to become the economys lead-

ing sector.1 Cross-country comparison suggests that in 1990, Indias

share o services, at 40% o the domestic output, was consistent

with its per capita income or low income countries. By 2001, its

share at one-hal o the GDP was higher by 5 percentage points,

compared to the average or low income countries, and closer to

the average or low middle income countries (Gordon and Gupta

2004). The aster growth o services since the 1990s is accompa-

nied by agricultural deceleration and industrial stagnation.

Speeding up o services growth is a puzzle (i) at such a low level o

per capita income (around $630 at current exchange rates in 2006),

and (ii) without a corresponding shit in the workorce distribu-

tion. These trends dey the stylised acts in economics that are still

valid or the economies o the Organisation or Economic Coopera-

tion and Development (OECD) (Schettkat and Yocarini 2006).

The services sectors exceptional perormance is widely attri-

buted to technological change and economic reorms since the

early 1990s. To quote Kochhar et al:

The big change has been in services, which have grown substantially

or a variety o reasons or example, telecommunications perhaps be-

cause o the private sector is allowed in, sotware and business process

outsourcing because o the opening o the economy, and construction

perhaps o the growth o retai l nance (Kochhar et al 2006: 982).

Such an explanation overlooks the act that over 60% o services

sector output still originates in the unorganised sector that has

been hardly touched by the reorms or technical progress. Much

o the public sector continues to be dominated by labour-intensive

services, with limited modernisation.

Attributing the economic outcomes to the policy shits and

technological change is intuitively appealing. However, such an

explanation ails to notice the potential problems in measuring

output in this sector. This is surprising given its seriousness even

in the developed economies or quite a while now.

Synoptically, the earliest trends in services sector growth were

noticed in the changing employment composition. As rising

industrial wage set the foor or the entire economy, Baumol

argued that services sector growth merely refected the rise in

wages. As services were not amenable to technical change, provi-

sions o services were bound to lead to higher and higher costs

and a rising share o services in the economy known as Baumols

cost disease hypothesis (Baumol 1967).Griliches (1992) demonstrated the diculties in measuring

productivity and quality improvements in services, but argued


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Economic & Political Weekly EPW january 31, 2009 41

that there have indeed been improvements in output per worker

in services. It is perhaps worth quoting him at length to appreci-

ate the conceptual and measurement problems involved:

Although services are dierent, they are not really so di erent rom

goods as ar as the problem o measuring output is concerned. Most

o the problems aficting the measurement o commodity output

aect also the measurement o services, only more so. To measure

the output o any activity we need to know its total receipts and haveadequate inormation to construct an appropriate price index or it.

To measure productivity, we need in additional parallel inormation

on the inputs used in production (total costs and prices or units used).

In either case, we need to know the relevant transaction unit and deal

with the problem o quality change, which arises rom the underlying

heterogeneity o outputs and inputs and continuing appearance

o new products, varieties and services, and the disappearance o

the old ones.

Why is the problem more serious in some o the services sectors? Partly

it is data problem, but also, more importantly, it is a conceptual one.

Many o the service industries produce intermediate products in areas

with very little direct price coverage, such as computer programming,

advertising and inormation. The producer price index (PPI), ormerly

the wholesale price index, the major source o defators or the GNP byindustry series, does not collect services prices (except o air- and water-

transport and telephone services). Because o this lack o data, a

number o service industries series are defated by makeshit defa-

tors, and real output is assumed to grow proportionately to some

measure o inputs and to lead to no observed productivity growth by

assumption. The latter is true o the whole government sector, the

contribution o various non-prot organisations, such as universities,

and such much dicult-to-measure sectors as banking and business

services (Griliches 1992: 6-7).

Declaring that Baumols cost disease has been nally cured

with the recent technical progress, Triplett and Bosworth (2001)

illustrate the diculties in estimating services sector output and

productivity growth:

In all o these services industries, conceptual and empirical prob-

lems in measur ing output and prices are notorious: For example, an

economic consulting rm is part o the business services industry.

How do we measure the output o an economic consulting rm? How

would we construct a price index or economic consulting? And how

would we compute the productivity o economists? The science o

economics is no closer to developing methods or measur ing the out-

put o economists own activities than it is or measuring the output

o banks, law rms, and insurance agents. All o these services poses

dicult problems or constructing price indexes and real output

measures and thereore or measuring productivity (Triplett and

Bosworth 2001: 25).

Considering the caution and caveats displayed in the oregoing

discussion, the celebratory tone o discourse on Indias services-

led growth appears premature. Perhaps it would be more realistic

and ruitul to take a closer look at the conceptual and methodo-

logical issues involved in measuring output, to question i the o-

cial estimates truly represent the reality.

As a rst step in this direction, Nagaraj (2008) examined the

output trends at a disaggregated level to the extent the National

Accounts Statistics (NAS) permitted. It discovered that two services,

namely, communications and businesses services, accounted or

the largest share o the incremental output in services, growing

close to 20% per year taking their combined share in servicesGDP to 14.6% in 2006-07, up rom 3.4% in 1991-92. As there are

reasons to believe there is an overestimation o the number o

direct telephone lines, and a possible double counting o the value

added in business services (also as actor payment), we expressed

scepticism about the true extent o the expansion o these serv-

ices. These measurement deciencies are attributable to the ab-

sence o independent public agencies to collect the primary data,

or the ocial capacity to veriy the credibility o the inormation

provided by the employers associations. Thus, we expressed

doubts on the veracity o the ocial estimates, without denyingthe recent progress in these services.

Continuing the inquiry, we now investigate two aspects,

namely, the price defators used to obtain the real output series,

and the private corporate sectors contribution to services

sector output.

1 p Dflto

Between 1950-51 and 1990-91, implicit GDPand services sector GDP

defators moved in perect unison (Figure 1). Thereater, however,

the services sector defator rose at a slower rate than theGDP defa-

tor, with a urther slowdown ater 2002-03.2 So, over the 17 years

since 1990-91, the annual trend growth rate o services sector de-

fator is 5.6%, while that or the GDPdefator is 5.8% both o them

being distinctly lower than the rise in the consumer price index or

urban non-manual workers (CPI-unmw), at 6.6% per year.

As most services are labour-intensive with little technical

change, it seems reasonable to assume that the labour cost in the

organised sector services would have risen at least as much as the

wages. Further, i we accept the widely held view that public sec-

tor wages set the foor or the private sector wage negotiations,

and that the Fith Pay Commission wages settlement in the mid-

1990s boosted public sector wages signicantly, then it is hard to

believe that the services sector defator could have risen at a

slower pace than the GDP defator.

Arguably, the introduction o computers could have compen-

sated by a aster productivity growth. But considering the low

level o penetration o inormation technology in government

and in the unorganised sector, such an argument appears weak.

Moreover, measuring the eects o the new technology on pro-

ductivity is ound to be hard, even in the developed economies.3

Thus, prima acie, there is a case to suggest an underestimation

o the price rise in services since the 1990s.I the services defator had grown as ast as the GDPdefator (as

was the case in the previous our decades), then the services sector

3500

3000

2000

1000

0

51 55 59 63 67 71 75 79 83 87 91 95 99 2003 2007

Fgu 1: sv and GDp Dflao

Index of deflators

Services deflator

GDP deflator

Year ending


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output annual growth rate between 2002-03 and 2006-07 (the

recent boom years), shrinks rom 9.3% to 7.6%. Further, i

defated by the CPI-UNMW, it gets urther reduced to 7.5% per

year (Figure 2).

To nd out which o the services

accounted or the decline in prices, we

disaggregated the price defators to the

extent the NAS permitted. Communi-cations price defator declined the

most nearly halved in seven years

(rom 100 to 54.4), between 1999-2000

and 2006-07 (Table 1). Undeniably, the

real price o communication has declined lately, as any one would

testiy due to technological change, growing competition, and

expansion o the scale and scope o the service. But the moot

point is, could the price defator halved in just seven years?

Looking at the compar-

ative experience is a way

to resolve the question.

The US, Japan and Korea

are the suitable compara-

tors, as they have surely

witnessed ar more tech-

nical progress in the tele-

communications industry

as in India.4 But the

decline in the prices o its

services in these countries

or the same period is

much lower 12%, 6%

and 4%, respectively suggesting an overstate-

ment o the decline in

India (Table 2).5 To arrive

at a realistic alternative

value, we defate Indias

current prices series with

the US defators. It sharply

reduces the annual growth

rate o communications

rom 25.7% to 17.6%, between 1999-2000 and 2006-07 (average

o annual growth rates).6

Previously, we had argued that the telecommunication rms

have an incentive to infate the number o subscribers to corner

scarce telecommunication bandwidth, leading to an overestima-

tion o the value added (Nagaraj 2008).7 We have now demon-

strated an overestimation o the value added on account o an

overstatement o the decline in prices (compared to the US, Japan

and Korea). In other words, both the price and the quantity o

supply o the telecommunication services are seriously fawed,

overstating the extent o the output growth.

2 pvt coot sto contbuton

To obtain the domestic output by type o institution, the NAS dis-aggregates the services sector into the organised and unorganised,

the latter accounting or about 60% o the total. The organised

sector consists o the public and private corporate sectors, with a

negligible contribution rom cooperatives. Lately, the shares o

the unorganised sector and the public sector have declined mar-

ginally (Shetty 2007). Thereore, by

denition, the private corporate sec-

tors (PCS) contribution has gone up,

accounting or the rest. Has it really in-

creased as much as the ocial esti-mates show? In other words, how cred-

ible are the value added estimates or

the private corporate sector?

In 2006, about 6,00,000 companies

were registered under the Companies Act, but only a small rac-

tion o them, in act, produced goods and services; most compa-

nies do not even submit audited accounts regularly as required by

the law. Hence, no direct estimation o the sectors economic con-

tribution is possible. This is obtained by blowing up (multiply-

ing) the sample estimates o a small number o companies (though

accounting or a large share o the paid-up capital) or the universe

o the registered companies. This procedure is widely even

ocially acknowledged to overestimate the private corporate

sectors share in the domestic saving and investment (Nagaraj

2008). We now try to nd out i the same aulty procedure has

contaminated the domestic output estimates as well.

2.1 Mthodology

NAS provides inormation on (i) GDP, (ii) GDP in public sector, and

(iii) the unorganised sectors share in the net domestic product

(NDP) at current prices. These data are available rom 1993-94 to

2002-03 (with 1993-94 base year), and rom 1999-2000 to

2005-06 (with 1999-2000 base year).Using items (i) and (iii) above, the organised sectors GDP is

obtained. Subtracting item (ii) rom this estimate yields GDP in

the private corporate sector or domestic output as well as or its

nineold disaggregation. The orgoing procedure assumes the ra-

tio o the organised to unorganised sector GDP at current and

constant prices to be the same.

2.2 rult

As noted above, between 1993-94 and 2005-06, the unorganised

sectors share in services output has declined marginally,

and that o the public sector by about 6 percentage points; and,

a corresponding rise in the private corporate sectors share

rom 10% to 17% o services GDP (Figure 3). The annual trend

growth rates o the real output during this period or public,

tabl 1: Gowh ra of iml Dflao ofGDp n sv (1999-2000 to 2006-07, % per year)

Services Implicit

Deflators

Trade, hotel, restaurants 5.3

Transport, storage, communication -0.3

Railways 2.3

Other transport 4.1

Communication 8.1

Finance, insurance 3.7

Banking and insurance 1.7

Real estate, business services 5.3

Community, social, personal services 4.0

Public administration and defence 4.4

Other services 3.5

All services 3.4

GDP (factor cost) 4.1These are average of annual growth rate.

tabl 2: p indx of communaon

2000 2007

India 100 54.4

US 100 88.1

Japan 100 94.2

Korea 100 96.7

For India it is the implicit GDP deflator; for the rest it is

the consumer price index.Sources: NAS; Global Insight for US(data from BLS);

Data Stream for Japan and Korea.

0

20

40

60

Fgu 3: Dbuon of sv s o GDp by ty of Oganaon (in %)

Public sector

Private corporate

Unorganised sector

1994 1996 1998 2000 2002 2004 2006

Year ending

2000-07 2003-07

10

8

4

0

Fgu 2: Offal and rvd GDp Gow h ra n svema (in %)

8.59.3

7.8 7.2 7.6 7.5

NAS estimates Deflated by GDP deflator Deflated by CPI


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private corporate and the unorganised sectors are 7.5%, 11.2%

and 7.8%, respectively.

The rising share o the private corporate sector in services

output is also true or the economy as a whole. During the same

period, its share in GDPhas doubled to 20% (Figure 4). In 1993-94,

nearly two-thirds o the corporate sector output was rom

manuacturing, declining to 44% by 2005-06; the shares o con-

struction, hotel and restaurants and so on have risen (Table 3).

By many accounts, the private corporate sector has indeed

grown rapidly, diversiying into many newer activities. But, couldits share have really doubled in a decade, when the economy

grew 6.1% annually? We contend this is an i llusion. As the private

corporate sector predominantly consists o non-operating com-

panies, its size gets overestimated when the sample estimates are

blown up or the universe o registered companies.

To demonstrate our contention, we compare the ocial gures

with an alternative estimate computed using the Centre or

Monitoring Indian Economy (CMIE) corporate sector data. Such a

comparison is not perect, however, principally, because the

alternative estimate is based on the inormation or about 6,000

companies in 2005, out o over 6,00,000 registered companies.8

But CMIE claims that it has collected data rom all the working

companies that urnish audited accounts.9 As a rst approxima-

tion, the alternative estimate may be reasonably accurate, i a

slight underestimate. Figure 5 reports the ocial and the alterna-

tive estimates o the size o the private corporate sector, as a share

oGDP.10 It suggests the ollowing:

(1) In 1993-94, the size o the private corporate sector in the

alternative estimate is merely one-hal o the ocial gure, at

6% oGDP.

(2) In the 12 years between 1993-94 and 2004-05, its size has risen

by 2.1 percentage points oGDP (rom 5.7 to 7.8), as against about

10 percentage points in the ocial gures (rom 10% to 20%).11

To allow or possible underestimation in the CMIE data, a sensi-

tivity analysis was carried out with doubling the growth rate, yet

it did not a make material dierence to our inerence. Thus,

even conceding a possible underestimation in CMIE, undoubt-

edly the ocial gures are seriously overestimated. Such an

inerence is buttressed by the inrmities in the estimation

procedures, as amply borne out by numerous observations

made in the ocial NAS: Sources and Methods, reproduced in the

Appendix here (CSO 2007).

3 conluon

Indias services sector-led growth since the early 1990s at a low

level o per capita income, unaccompanied by a corresponding

rise in its employment share, and poor perormance o com-

modity producing sectors is a puzzle. It dees the stylised

acts o economic growth. Many have attributed the growth

acceleration to technical change giving rise to new business

opportunities in the IT and IT enabled services, and generally to

the economic reorms that have deregulated many markets and

boosted private enterprise. Such an explanation seems uncon-

vincing since these changes have hardly touched the unorgan-

ised sector that accounts or three-ths o services sector out-

put, and the public sector has witnessed very little penetration

o the new technology.

Few have cared to look at the quality o the underlying eco-

nomic statistics. This is surprising given that there are major

concerns about the quality o services sector output estimates in

the developed economies, as they graduated to post-industrial

societies. This paper demonstrates an overestimation o services

output in India on two counts: one, an underestimation o the

services defator since 1990-91; and, two, an overestimation o

the value added in the private corporate sector due to aulty

methodology. A steep all in the prices o communications in the

current decade is mainly responsible or the decline in the serv-

ices defator. By comparing it with the US, Japan and Korea wedemonstrate that the price decline in communications is over-

stated, hence the growth in real output is overestimated.

tabl 3: GDp Ognang n pva cooa so

GDP from Corporate Sector Percentage Distribution

1993-94 1999-2000 1999-2000 2005-06

1 2 3 4 5

Agriculture and allied 1.9 0.9 9.6 5.9

Mining 0.2 1.5 1.5 0.8

Manufactur ing 63.7 53.9 47.9 44.4

Elec gas, water -3.9 -1.8 -2.0 1.1

Construct ion 16.0 8.9 9.5 10.9

Trade, hotel , restaurant s 7.6 17.0 12.3 13.1

Trade 6.0 14.3 10.3 10.8

Hotel, restaurant 1.8 2.7 2.2 2.3

Transport, storage, communication 3.8 -4.7 1.3 -1.5

Other transport 2.8 0.1 1.8 1.8

Communication -10.3 -14.8 -0.1 2.6Finance, insurance 15.2 22.5 22.2 21.6

Banking and insurance 9.0 13.7 13.0 10.0

Real estate, business services 2.9 7.2 7.3 11.8

Community, social, personal services 14.7 15.1 9.6 9.1

Other services 15.5 15.5 0.5 5.5

GDPfc 100 100.0 100 100

Estimates in Columns 2 and 3 are based on 1993-94 base-year, and Columns 4 and 5 on1999-2000 base-year.

Source: NAS, various issues.

Fgu 4: Dbuon of GDp by ty of Oganaon (in % of GDP)

70

60

40

20

0

1994 1996 1998 2000 2002 2004 2006

Unorganised sector

Public sector

Year ending

Corporate sector

Fgu 5: sz of cooa so (in % of GDP)

20

15

10

5

0

CMIE estimate

Official estimate

Year ending

1994 1996 1998 2000 2002 200 4


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Our eorts to indicate the magnitude o the overestimation o

the domestic output yielded the ollowing results:

(1) Assuming the services defator grew at the same rate as the

GDP defator (as was the case in the previous our decades), the

services sectors annual growth gets reduced by 0.7%, between

1999-2000 and 2006-07 rom 8.5% to 7.8% per year.

(2) Assuming the decline in the prices o communication services

were the same as in the US, the annual growth rate shrinks by8.1% per year between 1999-2000 and 2006-07 rom 25.7% per

year to 17.6%.

(3) Assuming that the value added in the private corporate sector

estimated using CMIE is more realistic, its annual growth rate

gets reduced by 0.5% to 5.5% between 1993-94 and 2005-06, and

by 0.8% to 5.8% between 2002-03 and 2004-05.

It is not possible to nd the combined eect o the orgoing re-

visions or lack o consistent data on all the required categories.

But, the magnitudes o the alternative estimates shown above are

large enough to make a serious dent in the ocial estimates. I

our arguments are persuasive and the evidence credible, then theanswer to the question posed in the title o the paper is yes. It

perhaps warrants a careul review o the output estimation pro-

cedures; and also, or a resh look at the recent growth experience.

Notes

1 The services sector includes (i) trade, hotels andrestaurants, (ii) transport, storage and communi-

cations, (iii) nancing, insurance, real estate, andbusiness services, and (iv) community, social andpersonal services.

2 Analysing the growth o the 1950s, K N Raj asearly as in 1961, alluded to the problem o over-

estimation o services sector output due to anunderestimation o the rise o their prices. See

Mody (2006).

3 It is worth recalling Robert Solows amous quipthat the eect o computers is everywhere, ex-

cept in productivity estimates. The dispute in theUS is now settled ater improvements in themeasurement methods. However, with littlecomparable eorts in India it is hard to expect a

similar changes in the measured productivity insuch a short time; thereore t he output estimatesare likely to be aulty.

4 Ideally, China is the best comparator. But theChinese statistics are probably a bigger mineeldthan ours.

5 The US data is rom the Bureau o Labour Sta-tistics; data or Japan and Korea are romDataStream. We thank Bobray J Bordelon oPrinceton University library services or provid-ing the data.

6 Some may ault our comparison since these econ-omies witnessed price declines in telecom servic-es earlier than in India. But eorts to defate withthe earlier years do not alter our nding. Between1992-93 and 2006-07, communications defatordeclined annually at 5.7 % in India, but only 1.5 %in the US.

7 To minimise the problem o price indices in serv-ices, the Central Serv ices Organisation apparentlyuses physical indicators to estimate the real out-put. But what i the physical indicators are poor,as in the case o the number o direct telephonelines, which is probably overestimated. Further,

what i the revenue per telephone line alls withinthe spread o access, as seems to be the case re-cently. Thereore, there is no short cut to estimat-ing accurately the number o lines in operationsand the price o the serv ice.

8 The CMIE dataset is not a panel; the number ocompanies included in it has gone up rom about2,000 in 1993-94 to about 6,000 in 2005.

9 To quote rom a CMIE document: The set o com-panies selected or this study is based on theavailability o the audited unabridged annual ac-counts. The rst step in selecting companies

was the identication o a global set on which allurther selections would be perormed. These

were companies which had at least one accountavailable during the period April 1998 and March2006, and which were operational. By operational

we mean companies which had at least somesales. This excludes companies which had ac-counts but had not begun commercial activities(CMIE 2006: 288).


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10 Corporate protability has shot up in the recentboom as evident rom tripling o the ratio oprot ater tax to net worth o the RBI sample o

companies to 16 % (Nagaraj 2008). The zoomingprotability is taken to represent a growingshare o the corporate sector in the economy. Butthis is not supported either by other measures o

nancial perormance, or by as a signicant risein the corporate sectors share in the domesticoutput.

11 Strictly speaking, one should also adjust thedenominator by replacing the ocial estimateo GDP in PCS by the CMIE estimates. We didthis, but it does not change materially the trends

reported.

References

Baumol, William J (1967): Macroeconomics o Unbal-anced Growth: The Anatomy o Urban Crises,

American Economic Review, Vol 57, June.

CMIE (2006): Corporate Sector (Mumbai: CMIE).

CSO (2007):National Accounts Statistics : Sources and

Methods (New Delhi: Government o India).

Griliches, Z, ed. (1992): Output Measurement in the

Service Sectors, Studies in Income and Wealth #

56 (Chicago: University o Chicago Press andNational Bureau o Economic Research).

Gordon, James and Poonam Gupta (2004): Under-standing Indias Services Revolution, IMF Work-ing Paper (WP/04/171), September.

Kochhar et al (2006): Indias Pattern o Development:What Happened, What Follows?, Journal of

Monetary Economics , Vol 53, No 5, July.

Nagaraj, R (2008): Indias Recent Economic Growth: A Closer Look, Economic & Political Weekly,Vol 43, No 15, 12 April.

Raj, K N (1961): Some Features o Economic Growth

o the Last Decade in India, Economic Weekly, 4February, reproduced in Ashoka Mody (ed.), In-

clusive Growth:K N Raj on Economic Development:

Essays from the Economic Weeklyand Economic &

Political Weekly (Hyderabad: Orient Blackswan),2006.

Schettkat, Ronald and Lara Yocarini (2006): The

Shit to Services Employment: A Review o theLiterature, Structural Change and Economic Dy-namics, Vol 17, No 2, June.

Shetty, S L (2007): Status Paper on Database Issues oServices Sector, Economic & Political Weekly,

Vol 42, No 37, 15 September.

Triplett, Jack E and Barry P Boswor th (2001): Produc-tivity in the Services Sector in Robert M Stern(ed.), Services in the International Economy (Ann

Arbor: University o Michigan Press).

andx: ext fom

Nas sou nd Mthod

(1) 16.6 Private Organised Sector: Esti-

mates oGVA relating to private corporate

sector are prepared by using the results o

the RBI study o the nances o a sample o

companies. GVA o the sample companies

is infated by the ratio o paid-up capital

(PUC) o all the companies engaged in

trading activity (data obtained rom the

Ministry o Corporate Aairs) and PUC o

sample companies. The constant-price

estimates o private corporate segment areobtained by applying the GDP implicit

defator (GDP excluding the GDP o Trade,

available on PUC [paid-up capital] in the

activity is used as such. Further, or the

unorganised part o the activity no cur-

rent data are available and only the bench-

mark estimates are moved with the indi-

cator o GTI rom commodity producing

sectors. As there has been no survey con-

ducted on the Trade sector, since the 53rd

round, the base year estimates also are

not based on current data (CSO 2007: 153;

emphasis added)

(6) Estimates oGDP or Transport, stor-

age and communication

Quality and limitations o database

17.35 The estimates o value added rom

Railways and Communication in public

sector are based on up-to-date and reliable

inormation. For the private sector, the es-

timates are not that robust as these are

compiled mostly through indirect meth-

ods using proxy indicators, such as number

o telephone connections or extrapolating

with inter-survey growth rates in work-

orce (CSO 2007: 161; emphasis added).

(7) Real estate, ownership o dwellings

and business services


19.29 While the estimates or the organised

sector in the computer related services are

estimated rom direct data sources, those

o organised and unorganised segmentsin respect o all other sub-sectors are

prepared through benchmark-indicator

method. On these segments no current

data on annual basis is available, al-

though rental inormation or urban ar-

eas rom CPI (UNME) can be assumed to

be a reliable source o current data. Reg-

ular, timely and complete data in respect

o these services, i available on the cor-

porate sector, could improve considera-

bly the quality o their GVA estimates

(CSO 2007: 171).

(8) Other services

While the estimates or the public sector

component are estimated rom direct

data sources, those o private organised

and unorganised segments in respect o all

economic activities are prepared through

benchmark-indicator method. On these

segments no current data on annual

basis is available. Regular, timely and

complete data in respect o these services,

i available on the corporate sector, couldimprove considerably the quality o their

GVA estimates (CSO 2007: 179).

hotels and restaurants) on the current

prices estimates.

(2) 16.7 The estimates oGVA or coopera-

tive societies (or trade only) are prepared

using inormation available rom NABARDs

publication entitled Statistical State-

ments Relating to Cooperative Movement

in India, Part II-Non-credit societies. Thepublication has a time lag o our to ve

years. The constant price estimates o

cooperative societies in trade sector are

obtained by moving the base year esti-

mates with the index o defated sales (the

value o sales at current prices is defated

using wholesale price indices o non-ood

articles and manuactured products) o

corporate sector.

(3) 16.8 The GVAestimates o Maintenance

and repair o motor vehicles and Repair o

personal household goods activities are

prepared as a product o workers and GVA

per worker. The estimates o number o

workers or these two categories are taken

rom DGE&T publication Employment

Review. The estimated GVA per worker

or these activities is obtained by dividing

the GVA estimates as prepared in paragraph

16.6 by the number o corresponding

workers in private corporate sector, in the

absence o direct data.

(4) 16.9 In the case o the activity, Main-tenance and repair o motor vehicles, the

growth trend observed in private corpo-

rate sector relating to wholesale and re-

tail trade excluding motor vehicles is

used to move the current price estimates,

or subsequent years. The constant price

estimates are prepared by defating cur-

rent price estimates with the implicit price

defator, mentioned in paragraph 16.6, or

subsequent years. For the activity o repair

o personal household goods, the base

year estimates are moved with the growth

rate in workorce, or obtaining the esti-

mates or subsequent years. The constant

price estimates are infated by CPI-IW to

obtain estimates at current prices, or

other years (CSO 2007: 151).


(5) 16.22 While the GVA estimates o public

sector which are based on current data

may be considered reliable, the private

corporate sector GVA estimates based on

RBI sample studies are not robust, as theseare based on thin samples, and sometimes in

the absence o these data, the inormation

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