New Series of National Accounts

The new series of national accounts with a revised base year of 2011-12, released by the Central Statistics Office (CSO) on 30 January, 2015. The base year of the national accounts is revised from time to time, but this time the CSO has also revised the methodology of calculating these statistics in line with requirements of the System of National Accounts (SNA), an internationally accepted standard. Now Central Statistics Office will start measuring the country's economic growth by gross value-added (GVA) at factor cost, replacing the practice of measuring it by GDP at factor cost. It may be noted that sum total of GVA of all the sectors of the Economy is equal to GDP. Thus, GVA at factor cost = GDP at factor cost = GVA at market prices - Indirect tax + subsidies. In other words, Gross value added at factor cost (formerly GDP at factor cost) is derived as the sum of the value added in the agriculture, industry and services sectors. If the value added of these sectors is calculated at purchaser values, gross value added at factor cost is derived by subtracting net product taxes from GDP. Earlier "GDP at factor cost" was known as simply the "GDP" in India. Now, in the revised series, "GDP at market prices" will be referred to as "GDP" and, as is the practice internationally, industry-wise estimates are presented as Gross Value Added (GVA) at basic prices. GVA at basic prices can be referred to as GVA at producer price and GDP at market price as GDP at buyer price. Furthermore in this new System of National Accounts, bigger data base of manufacturing sector will be used. Earlier the sectoral manufacturing data value addition was sourced from the RBI Industrial Outlook Survey conducted on an quarterly basis; but now with the Ministry of Corporate Affairs making it obligatory on the part of the companies registered under the Companies Act for online reporting, the MCA 21 database has been used for the manufacturing sector value added. The MCA database as on date covers 5 lakh companies and is fairly representative of the universe. The RBI surveys are small in size and not much reliable for the sectoral analysis. Further, the manufacturing value added was calculated from ASI Annual data and extrapolated using IIP for the intervening period. The limitation with this data was that the ASI and IIP are establishment based data while the MCA database goes beyond establishment based value addition and also incorporates data on brand pricing ,marketing etc i.e. includes allied activities which were earlier outside the purview of manufacturing value added. Further the corporate segment manufacturing coverage accounts for almost 66-70 percent of the manufacturing sector. The reasons for the rise in growth for manufacturing sector at new base are structural as well as change in compilation methodology. The methodological changes includes the change in approach, better coverage, use of new valuation methods and introduction of new concepts. Some of these highlighted in the Press Note are as follows:

  1. The shift from Establishment approach to Enterprise approach: The establishment approach used in Annual Survey of Industries did not capture the activities of a unit other than manufacturing. Whereas, an enterprise along with its manufacturing activities is also engaged in activities other than manufacturing such as ancillary activities etc. Now, in new approach, the activities of a manufacturing company other than manufacturing are accounted in manufacturing sector. The enterprise approach is facilitated by MCA 21 data with Ministry of Corporate Affairs. These changes possibly have increased the coverage of registered sector of manufacturing.
  2. Incorporation of findings of NSSO Surveys: The details of new NSS Surveys viz. Unincorporated Enterprises Surveys (2010-11) and Employment & Unemployed Survey, 2011-12 are now available, therefore incorporated in the new series. The updates are an improvement in the representation of activities in the unorganized manufacturing sector.
  3. The change in Labour input Method: The new series has switched over to ´┐ŻEffective Labour Input Method´┐Ż for Unincorporated Manufacturing & Services Enterprises. Earlier method was assigning equal weights to all types of worker, while the new method assigns different weight for workers as per their productivity.

In sum, one can say, the vast difference in the new series figures is not just because of updation of the database or change in methodology but more so because of the change in data source. Trend analysis not possible right now but can be tried by working out the difference in the ASI value added and the MCA database.