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Services GDP: Issues in Estimation

India's Growing Services Sector: Database Problems and Issues

The increasing importance of services in the Indian economy prompted the organisation of a seminar, 'Growing Size of the Services Sector in the Indian Economy' , in 2006. After briefly touching on the problems of collecting data relating to the size of the sector, this article introduces the content of the papers that were presented at the seminar and that follow in this issue.

Status Paper on Database Issues of the Services Sector

The sustained and rapid growth of the services sector in the Indian economy has raised questions about how to accurately estimate the contribution of the sector to GDP. There are problems relating to the methodology employed on the contribution of the private sector, especially the unorganised part of the private sector. This paper outlines these problems, which were considered at the March 2006 seminar.

Measurement of GDP of Services Sector in the New Series of National Accounts Statistics

The rising share of the service sector in the gross domestic product marks a structural shift in the Indian economy and brings it closer to a developed economy. In view of its rising importance, an attempt has been made in this paper to present the salient features of changes in the methodology and coverage of this sector in the new series (base 1999-2000) of national accounts statistics.

Gross Domestic Product from Services Sector

This paper deals with the methodology and data sources used for estimating gross value added from different categories of services, especially from the unorganised sector. The GVA estimates are first obtained for the benchmark year as a product of workforce estimate with the GVA per worker. These are moved forward to get the corresponding values for subsequent years by making use of physical and price indicators. In this paper we discuss the problems in getting the estimates of workforce for the base year. In most cases consumer price indices are used to estimate GVA per worker at current prices. It also discusses the problems relating to the use of physical indicators. Some suggestions for improving the estimates are given.

Calculation of Gross Value Added in the Unorganised Sector

The unorganised segment of the economy has been growing steadily in terms of its contribution to the net domestic product, particularly the part of it that falls in the service sector. Measuring the labour input and gross value added per unit of labour input in the unorganised segment are challenging because of the need to take account of workers with multiple economic activities. This paper suggests a way to more accurately compile these statistics on the basis of the enterprise surveys of the National Sample Survey Organisation.

Regrouping of Economic Activities

The authors describe the manner in which the Central Statistical Organisation regrouped economic activities according to a new classification scheme which could be used to compile national accounts statistics with the new base year 1999-2000. This classification scheme was particularly important for the service sector of the economy. The justifiability of the classification scheme is discussed with reference to the relative standard error in estimating gross value added for each group of activities, at all-India and state levels, and for rural and urban areas.

Precision of Estimates of Gross Value Added Per Worker

Gross value added per worker (GVAPW) in any sector of the economy is an important parameter used in national accounts statistics since its product with the population of the workforce is used to estimate GDP originating in the sector. The author describes the method used for estimating GVAPW in the services sector in the 57th round of the National Sample Survey, and discusses the sampling error of the estimates as well as the probable reasons for large possible error in some sub-sectors.

Measuring Banking Intermediation Services

This paper reviews the methodology for estimating output from banking intermediation services in India. The existing practice is compared with the guidelines provided in the United Nations System of National Accounts 1993. The paper identifies certain unsettled issues and problem areas in measuring banking intermediation services.

Banking Sector's Output in National Accounts: Measurement Issues

The revision of the system of national accounts of 1993, due by 2007-08, is expected to bring about several conceptual and computational changes. The impact of such changes on the financial sector's contribution to the gross domestic product seems to be quite significant. These changes are conceptually intricate and their implementation would also be challenging. This paper presents a prospective view of the ensuing changes as debated in international forums. In addition, two key issues, namely, the valuation of GDP of the banking sector at constant prices and the treatment of non-performing loans of banks in national accounts are discussed. The paper also highlights that the adjustment of financial intermediation services, indirectly measured, for the incidence of non-performing loans will have significant effects on the estimated macroeconomic aggregates on financial activities.

A User's Perspective on the Database of Services Sector in Indian Economy

Measuring the contribution of services to the Indian economy is a challenging task because it presents problems not encountered in the primary and secondary sectors. The authors discuss problems found particularly in quantifying the contribution of the banking and software sectors and suggest ways of overcoming these problems.

Service Producing Manufacturing Units and Their Impact on Sectoral GDP

Manufacturing services are characterised as outsourced parts of a total production process and comprise output of those manufacturing activities that are performed on the physical inputs owned by units other than the units providing the service. According to standard industrial classifications, these are included in manufacturing. Sixty-four per cent of the unregistered manufacturing establishments in India are, in fact, engaged - more often than not solely - in providing manufacturing services. Generally, these activities are treated as "manufacturing" while estimating domestic product or supply side aggregates, but as "services" while estimating expenditure or use side aggregates. This paper presents a profile of the manufacturing services providing segment of the unregistered manufacturing sector and briefly dwells on the ambiguities inherent in the accepted definitions of "manufacturing" activities and "services". It illustrates the implications of the dual treatment in estimating sectoral distribution of domestic product and concludes that distinguishing manufacturing services from other manufacturing activities in the industrial classification might help resolve this issue as well as related problems in a wide range of applications.