Report to the President of the International Bank for Reconstruction and Development and the International Development Association on India's economic development effort (Vol. 13 of 14) : Statistical operations

 PREFACE I 1 Volume X 1 reviews and analyzes the s t a t i s t i c a l operations of the Government of India. It was prepared by Miss Doreen Crompton (who became Mrs. Doreen Calvo i n t h e course of t h e i%ssion's work). It i s based on i n v e s t i g a t i o n i n I n d i a i n t h e period October 196h t o February 1965. Mrs. Calvo completed t h e w r i t i n g of t h e r e p o r t i n t h e summer of 1965 p r i o r t o h e r r e s i g n a t i o n from t h e IBKD. Ekcept f o r a few minor e d i t o r i a l changes, t h e r e p o r t has not been revised o r updated.  TABLE OF CONTENTS Page No. CHAPTER 1: REVIEII OF FINDINGS 1 CHAmR 2: NATIONAL INCOME ESTII'UTES 7 CHAPTER 3: AGRICULTURAL STATISTIC5 AND INmlE FROP4 AGRICULTURE CHAPTER 4: THE NATIONAL SALIPIE SURVEY iJotes 0'9: : . 5itlmll-$~"l.e-;z. r.:?,:c t v r i n g E n t e r p r i s e B. ~~ 1 1 1 4-5rj.r 1 Prqd?rcL3 oq 1-de:; C. l'rorking G! .'F s Coi.ls~ilerPiqj.ce Index :. D. ':.%olese.le P r i c e I-.:c!c; ."''. 3nployinent De.te.  CHAPTER I : REVIEW O FDJDIXGS F 1. Assessment of the q u a l i t y of s t a t i s t i c s i n India y i e l d s paradox- i c a l conclusions. On t h e one hand t h e r e i s a b a t t e r y of s t a t i s t i c i a n s of i n t e r n a t i o n a l repute, a considerable number of high q u a l i t y s t a t i s t i c i a n s throughout and outside Government, and even a surplus of unemployed q u a l i - f i e d s t a t i s t i c i a n s . There e x i s t s a l s o an expressed awareness of t h e dependence of planning on s t a t i s t i c s . Further, those whose job it i s t o draw up t h e plans and n a t i o n a l account estimates a r e c r i t i c a l of t h e d a t a crith which they work and frequently voice t h e i r need f o r b e t t e r data. The machinery f o r c o l l e c t i o n of data i s grand i n scope and, p a r t i c u l a r l y i n t h e case of o f f i c i a l sample surveys, imaginative and well-designed. A purely d e s c r i p t i v e statement of t h e methods and means by tihich d a t a a r e collected and u t i l i z e d places I n d i a i n a s p e c i a l position among under- developed countries, i.e., t h e o r e t i c a l l y way ahead. n O t h e other hand, because of a gap between theory and p r a c t i c e or implementation, tlie q u a l i t y of Indian s t a t i s t i c s leaves much t o be desired. 2. The reader might t a k e t h e l i n e t h a t there a r e " l i e s , damned l i e s and s t a t i s t i c s f f . Data everywhere i n most countries of t h e world a r e suspect. The Indians a r e t o be admired f o r t h e i r good t h e o r e t i c a l base, awareness of t h e value of s t a t i s t i c s and construction of appropriate machinery to c o l l e c t the raw data. Given a l s o t h a t t h e s i z e and economic c h a r a c t e r i s t i c s of I n d i a ' s population pose g r e a t e r problems f o r s t a t i s t i c a l measurement than any other s o c i e t y i n t h e world (with t h e possible exception of China), it could plausibly be argued t h a t i t i s both unfair and unreal- i s t i c t o be c r i t i c a l of t h e present q u a l i t y of s t a t i s t i c a l data i n India. 3 However, i n our opinion t h e q u a l i t y of I n d i a ' s s t a t i s t i c s must be measured not against t h e q u a l i t y of s t a t i s t i c s elsewhere but against p I ~ d i a ' s o t e n t i a l f o r producing good s t a t i s t i c s . A s has already been s t a t e d t h i s p o t e n t i a l is l a r g e , consisting of I n d i a ' s able s t a t i s t i c i a n s , t h e i r proven a b i l i t y t o surmount inherent d i f f i c u l t i e s , and an appropriate data c o l l e c t i o n machinery. It seems a l s o relevant t o judge I n d i a ' s s t a t i s t i c s a g a i n s t the background of f i f t e e n years of planning., which sharpens t h e focus on data required f o r t h e purpose. Study of t h e data now a v a i l a b l e f o r constructing a s e t of n a t i o n a l accounts and f o r planning reveals an a s y e t inadequate data base f o r e i t h e r purpose. The inherent d i f f i c u l t i e s i n measuring Indian economic phenomena are not c u r r e n t l y t h e t r u e reasons f o r poor data. These d i f f i c u l t i e s :,?ere understood and appropriate a c t i o n was taken i n 1950, t o solve such s t a t i s t i c a l problems. N.B. -- Any p a r t of t h i s r e p o r t i n square brackets, i . e . /- 7, i s regarded a s extremely s e n s i t i v e and the Mission suggests t h a t it should be omitted from any d r a f t f o r c i r c u l a t i o n outside t h e Bank. 4. I n t h a t year, an imaginative and well-designed instrument National Sample Survey (Nss) - the- was created t o c o l l e c t t h e d a t a t h a t wourld f i l l i n t h e gaps then e x i s t i n g f o r n a t i o n a l income e s t i m a t i o n and there- f o r e , by implication, those gaps i n d a t a required f o r planning. The f i e l d s t a f f engaged i n t h i s e x e r c i s e a r e , i n the Mission's opinion, w e l l quali- f i e d , w e l l t r a i n e d , dedicated and s t r i c t l y supervised. There would appear - t o be no reason why I n d i a should not, by now, have an adequate s t a t i s t i c a . 1 base f o r n a t i o n a l account e s t i m a t i o n and planning medium and long-term. 5 I n f a c t , a s has been s a i d , such an adequate base does n o t p r e s e n t l y e x i s t . The main reasons f o r this seem t o be t h a t t h e National Sample Survey has t o o o f t e n been misdirected t o ad hoc e n q u i r i e s of temporary i n t e r e s t , agricultural s t a t i s t i c s - t o s u b j e c t s of sometimes even ma.rgina1 s i g n i f i c a n c e , and i n a c r u c i s l a r e a i n t o a prolonged, and expensive enquiry t h a t - d u p l i c a t e s t h e e f f o r t s on a n a t i o n a l s c a l e of another agency, i . e . Minis- try of Agriculture. The d u p l i c a t i o n has produced s i g n i f i c a n t l y c o n f l i c t - i n g estimates of t h e annual l e v e l of foodcrops production. The contro- versy i s unresolved a f t e r e i g h t years, although r e c e n t l y experiments t o r e s o l v e t h e d i f f e r e n c e s have been undertaken. Idhat i s n o t c l e a r i s why t h e NSS e i t h e r d i d n o t o r was not ena.bled t o p r o f f e r t e c h n i c a l a.dvice t o t h e Ministry of Agriculture a s a means t o improving d e f i c i e n c i e s i n t h e l a t t e r ' s estimates. This would have averted t h e p r e s e n t s i t u a t i o n where- a d u a l s e r i e s of both a r e a and production estimates a r e published c o n c w r e n t l y ezch yea.:.:,. 6. T h s r e s p o n s i l i l i t y f o r t h e disappointing outcome of t h e NSS appears t o l i e on ma.ny shoulders: on t h e many members of t h e M S Programme AdvisoryS Committee who annually decide on t h e s u b j e c t s of enquiry i n t h e following round; on some eminent members of I n d i a ' s academic worlds who i n t h e i r capa- c i t i e s a s a d v i s o r s t o t h e Indian Government have turned t h e NSS i n t o a t o p i c of controversy; on t h e Indian S t a t i s t i c a l I n s t i t u t e ( I S I ) which appears t o have done a l e s s than s a t i s f a c t o r y job of t a b u l a t i n g , processing, and pub- l i s h i n g t h e da.ta of t h e NSS; on t h e Central S t a t i s t i c a l Organization (CSO) and t h e Planning Commission n e i t h e r of which have been a b l e t o enforce t h e S u t i l i z a t i o n of t h e M S t o ensure an adequate provision of n a t i o n a l accounts and o t h e r d a t a which a r e required f o r planning purposes. 7. That t h e r e i s general d i s s a t i s f a . c t i o n w i t h t h e work a c t u a l l y done by t h e NSS and t h a t t h e r e i s genuine cause f o r t h i s d i s s a t i s f a c t i o n , i s i n d i c a t e d by a Government enquiry. The enquirywas e s s e n t i a l l y i n t o Government c o n t r a c t s with t h e ISI. In f a c t t h e comments of the Public Accounts Committee of Enquiry a r e highly c r i t i c a l of t h e I S 1 which i s re- - sponsible f o r t a b u l a t i o n , proces sing, r e p o r t w r i t i n g and p u b l i c a t i o n of NSS data a s opposed t o f i e l d work, which i s done by a competent and w e l l or- ganized branch of t h e CSO. The I S 1 has s e r i o u s l y reduced t h e u t i l i t y of S much of t h e work of t h e M S by delays i n processing and publication. Their f i n a l p u b l i c a t i o n s l e a v e much t o be desired i n a n a l y s i s and p r e s e n t a t i o n of NSS data. Some r e s e a r c h workers i n India would, perhaps u n f a i r l y , charge t h e IS1 with a preference f o r r e t a i n i n g t o i t s e l f , r a t h e r revealing, t h e information it has acquired. Another a r e a i n wlxich t h e I S 1 has s p e c i f i c power and must accept considerable r e s p o n s i b i l i t y f o r failure of t h e NSS i s in the comparability of t h e sample f r m round t o r a n d . Changes, e s p e c i a l l y i n concept and d e f i n i t i o n , have made comparison of r e s u l t s over a period of time of l e s s than limited usefulness. 8. The f a i l u r e of t h e NSS t o provide t h e data required f o r b e t t e r understanding and planning of the Indian econany i s unfortunate s i n c e t h e r e a r e few a l t e r n a t i v e sources of s a t i s f a c t o r i l y systematic and continuous d a t a i n India. Innumerable agencies i n India a r e concerned i n sample s u p veys. The Reserve Bank of India i s one of t h e few engaged i n continuing surveys and a s a r e s u l t t h e i r Rural Credit Survey, though q u i t e s p e c i f i c i n its subject of enquiry, seems o f t e n t o be t h e main source of information f o r a l l and every subject f o r which data i s required. The ad hoc surveys of other agencies a r e of ranging q u a l i t y o r u t i l i t y , but do not provide con- secutive s e r i e s of relevant information. 9. Certain Government departments c o l l e c t and publish i n d i c a t o r s n such a s t h e wholesale p r i c e index a,nd consumer p r i c e indices. O t h e whole, however, very l i t t l e s t a t i s t i c a l information ccmes out of t h e records of Government administration. One of t h e exceptions is t h e i n d u s t r i a l pro- duction index, where t h e physical volmes of production a r e obtained from Government agencies concerned with alloca,tions of scarce resources t o industry. A study was r e c e n t l y made on t h e information system require- ments of t h e Directorate General of Technical Development. The importance of DGTD i n provision of i n d u s t r i a l d a t a and a comment on t h a t d a t a may be rm summarized i n a d i r e c t quotation f o t h e study: "Lack of adequate con- t r o l over input data, a l a r g e f r a c t i o n of which i s provided on a volunta.ry basis by apprcudmately k,sOO i n d u s t r i a l firms, has l e d t o poor q u a l i t y of much of t h e information received including serious d a t a gaps." I n e f f i - ciencies i n d a t a c o l l e c t i o n by Government departments ha.ve many f a c e t s : i) t h i s work i s o f t e n delegated t o untrained, unsupervised and general low-level personnel, e. g. consumer p r i c e data collected i n the States, by other than Sta.te S t a t i s - t i c a l Bureau s t a f f ; ii) merely a s l i g h t v a r i a t i o n on t h e above; recording person- n e l a r e often incapable of understanding t h e l i m i t a t i o n s of t h e data they a r e collecting, e.g. employment s t a t i s t i c s ; iii) i n c e r t a i n areas of data collection, t h e Government offi- c i a l s c o l l e c t i n g the data a r e not unbiased o r llunbiasablell; iv) i n cases where data a r e collected by a v i l l a g e o f f i c i a l , h i s d u t i e s a r e s o numerous and varied t h a t c o l l e c t i o n of data, when time-consuming, i s ignored. 10. The f a i l u r e of Government administration t o produce f r a n within i t s e l f s t a t i s t i c s obtained f o i t s extensive licensing, a l l o c a t i o n o r rm other administrative a c t i v i t i e s seems inexplicable. Government o f f i c i a l s and even members of t h e CSO, who would most benefit from such information, offer many reasons why in each p a r t i c u l a r case the r e s u l t i n g data would be unusable. Often, however, the reason seems to be e i t h e r t h a t i t has not occurred t o the agency concerned t o record, systematically, data ob- t a b e d or, where t h i s i s admitted t o be desiraXe, s t a f f a r e not; available f o r allocation t o such a task. One concrete example is the laclc of data on the economic a c t i v i t i e s of small scale manufacturing enterprises. The Directorate of Industries In each S t a t e i s responsible f o r t h i s s e c t o r and many of them even produce a Directory of the firms i n question. And yet no data are available on t h i s sector; in f a c t it heads the l i s t of sub- j e c t s proposed f o r inclusion i n the forthcoming round of t h e NSS. 1.1 The State S t a t i s t i c a l Bureaus a r e heavily involved i n data collec- tion, but often there i s a c o n f l i c t between data required by the Center and data required f o r S t a t e purposes. S A great weakness of the N S i s t h a t , although the S t a t e Bureaus p a r t i c i p a t e on a matching basis with Center N S s t a f f , the sample is too small f o r S t a t e purposes. The im- S pression gained from v i s i t s t o several State Bureaus i s t h a t they range from the ttbetter-than-excellentll t h e t o t a l l y inadequate. A t t h e i r to best, they are involved in economic analysis of t h e data they c o l l e c t and a r e geared t o the planning requirements of t h e i r Statc. A further impression i s t h a t many of the S t a t e s a r e o r could be, a mine of informa- t i o n which, f o r want of coordination, does not, or i s only j u s t beginning t o surface a t the all-India level. There is, however, also an im~ression, corroborated i n one s p e c i f i c instance r e l a t e d t o a famine in the l a t e nine- teenth century t h a t some data are collected from sheer habit rather than for their utility. 12. W have she impression a l s o of a h i a t u s between s t a t i s t i c a l and e economic analysis. In one f om, the Committee on Prices of the Government of India does not consider it e i t h e r necessary or t o be i t s function t o enquire i n t o t h e economic as opposed t o s t a t i s t i c a l causes f o r t h e r i s e i n prices, nor, apparently does any other Government body. I n another form, the C O has wedded i t s e l f t o the use of r a t i o s , t o t,ortuous s t a t i s t i c a l S devices t o obtain its n a t i o n a l income and investment estimates. The C O S i s i n so many ways a most admirable i n s t i t u t i o n , making courageous attempts t o produce c r u c i a l aggregates frorn a minimum of scattered raw data, welded together with ingenuity and painstaking hard work. However, there i s lacking from t h e i r excellent, detailed statement of methodology a c r i t i c a l economic analysis of t h e s t a t i s t i c a l r e s u l t s obtained. Since the under- - lying s t a t i s t i c a l data are ~?eak as frankly s t a t e d by the C O the S- estimates can be e a s i l y c r i t i c i z e d o r even dismissed. -*en, however, economic deductions are made f r o n t h e s t a t i s t i c a l r e s u l t s it becomes ob- vious in s p e c i f i c cases j u s t where and haw wrong, in q u a l i t a t i v e terms, the data a r e f o r certain sectors. 13. n O the whole problem of national income estimates, ';Jestern con- cepts and methods of estimating aggregate income, investment and saving a r e not r e a d i l y applicable in a country l i k e India t h a t does not conform i n economic a c t i v i t y t o Western economies. For one thing the principal saurces of data i n Mestern countries, e.g. taxation, s o c i a l security, etc., cover, i n India, only a minimal section of the population. That section of the population t h a t i s variously described a s the subsistence, the non- organized o r household sector j u s t does not lend i t s e l f t o consistent, s t a t i s t i c a l measurement other than by sample studies. Indian s t a t i s t i - cians are e s s e n t i a l l y p u r i s t : tne concepts used a r e refined, but the data available are t o t a l l y inadequate f o r sec5ors t h a t a r e iihought t o con- t r i b u t e some 30 per cent t o national income. A study of t h e methods used t o obtain income estimates f o r most sectors other than t h e organized indus- t r i a l and, t o a l e s s e r degree, t h e a g r i c u l t u r a l sector leaves one with admiration f o r the ingenuity of the compilors, but i n agreement with the studied comment of a r e s p c t e d member of the National Ineome Committee t h a t he could only make Ira wild guess" a t the r e a l r a t e of growth in income over a period of years. After similar study of the C S O I ~ steps towards produc- ing investment estimates and t h e R B I 1 s savings estimates, t h e quoted com- ment applies equally. 14. e W have referred t o t h e a t t i t u d e of Indian s t a t i s t i c i a n s . While t h i s is a q u a l i t y generally warranting appreciation r a t h e r than cri- ticism, there are occasions on which undue refinement i s both out of place and misleading. I n the Indian context,, a specific example is t h e use of the "net1' a s opposed t o the "gross" concept. The fashion in India i s o r generally has been t o use t h e net concept: n e t of inputs and net of depre- ciation. me net concept i s more often used than the gross for planning, national income and t h e r e l a t e d investment estimates. often, the n e t estimates are arrived a t by deducting from the gross estimates inputs and depreciation. And, i n f a c t , both these i t e m are v i r t u a l l y incalcu- f l a b l e ~ o r a l l but the organized i n d u s t r i a l sector. Through the Annual Survey of Industries, input data are now beginning t o be available. Depre- ciation estimates however are generally, when available, allowable deductions f o r t a x purposes. I n the public sector, in particular, sums s e t aside f o r depreciation allowances are used t o finance c a p i t a l expenditure, i.e. in- vestment. Idhere d i r e c t depreciation estimates are not available the C O S uses somewhat a r b i t r a r y estimates, e.g. the estimated average l i f e of a house and on the b a s i s of estimates of stock of housing arrives a t annual depreciation estimates. A f u r t h e r problem with depreciation i n r u r a l areas i s t h a t much so-called investment i s i n fac:; rcpairs and maintenance or such short-lived investment t h a t the r a t e of depreciation becomes ludicrously high, e.g. 60 per cent of s ~ e c i f i c investment. A more judicious use of the "net" concept i s suggested with preferably, wherever possible, comparable presentation of t h e gross concept. 15 Indian s t a t i s t i c s cannot improve s i g n i f i c a n t l y u n t i l t h e basic data improve. However, most of t h e present deficiencies in data collection are remediable. Furthermore, sone improvement i s possible even now i n t h e pre- sentation of data. A not s o minor and i r r i t a t i n g point about much of In- d i a ' s published s t a t i s t i c s i s t h e lack of explanatory footnotes or, a l t e r - natively, t o t a l l y misleading footnotes; the use of d i f f e r e n t concepts, without explanation, i n the same or same s e r i e s of tables; and the fre- quency of differfng s e t s of data f o r the sam indicator published by the same o r d i f f e r e n t sources without attempt at reconciliation or explanation. 16. Much or a l l of the c r i t i c i s m expressed in these paragraphs i s a l s o expressed by Indians in India. I n f a c t a l l t h e information on which these conclusions are drawn has been provided by Indians i n G o v e m n t . Then the time came t o draw up the Third Five Year Plan the lack of an adequate data base became very apparent. Efforts have been made since then t o improve both data c o l l e c t i o n and its use. The C O i n p a r t i c u l a r has, s i n c e 1960, S published f o r t h e f i r s t time a "revised s e r i e s r r of n a t i o n a l income and i s p r e s e n t l y working on revisions t o t h a t revised s e r i e s . They a l s o have made two attempts t o c a l c u l a t e aggregate investment. They ha.ve a l s c f c r the f i r s t time published an expenditure s e r i e s f o r t h e public sector, widening the d e f i n i t i o n t o include the whole of t h e public sector: Govern- ment administration, departmental and non-departmental enterprises. They have a l s o attempted a study on F l o w of Funds. A f u r t h e r s t e p i n the r i g h t d i r e c t i o n i s the c l o s e r coordination between the C O and t h e S t a t e S t a t i s - S t i c a l Bureaus, r e f l e c t e d i n t h e naw increasing attempts by the S t a t e s t o produce Sta.te Income estimates. There has been considerable a c t i v i t y by Standing Committees t o analyze c r i t i c a l l y s p e c i f i c i n d i c a t o r s and a s a r e s u l t the weighting of t h e wholesale p r i c e and i n d u s t r i a l production indi- ces ill be changed t o provide a l a t e r base year. The data provided by . the Annual Survey of Industries i s the basis f o r input-output t a b l e s of analytical wefulnes s 17. A l l these e f f o r t s a r e admira-ble; it i s r e g r e t t a b l e only t h a t they were initia.ted s o long a f t e r the e r a of planning began i n India. A major problem s t i l l remaining i s whether f o r the l a r g e s t s e c t o r of economic a c t i v i t y , i . e . the unorganized s e c t o r , r e l i a b l e data can be developed. Here i t becomes necessary t o organize processing and analysis s o t h a t it provides information quickly. It a l s o becomes necessary t o benefit from the information acquired by Government i n the course of i t s administrative a c t i v i t i e s . Greater coordina,tion between c o l l e c t i n g agencies t o achieve some amalgamation of e f f o r t i s required. A s t a r t i n g p o i n t would seem t o be t o widen the r e s p o n s i b i l i t i e s and, i n s e v e r a l cases strengthen, the Sta,te S t a t i s t i c a l Bureaus. The C O must a l s o be strengthened i n terms of S sheer numbers a s t a f f , i n i t s coordinating functions, and i n t h e power f of i t s voice among other Government agencies.  CEAmfl 2: NATIOML 1NCG.Z ESTIiATES 18. National Income d a t a a r e calculated by t h e Eational Income Unit (NIU) of t h e Central S t a t i s t i c a l Organization (GO) which i s p a r t of t h e Cabinet S e c r e t a r i a t . The C O publication llProposals f o r a Revised S e r i e s S of National Income Estimates f o r 19 5-56 t o 1959-60" published in 1961 and 7 an e a r l i e r work published i n 1954: contain a f -dl statement of t h e i r methodology and sources. The former publication contains 236 pages of t e x t and tables. It i s an outstanding piece of work in i t s t o t a l coverage and i n t h e d e t a i l and frankness of i t s s t a t e m e ~ t s . This r e p o r t b A l l confine i t s e l f t o a &enera1 summary of t h e main methods of c a l c u l a t i n g income e s t i n a t e s with, here relevant, e x t r a c t s from the 1961 report. IIore d e t a i l e d ,treatment of t h e a g r i c u l t u r a l s t a t i s t i c s i s given i n Chapter 3. 19. It shou2.d f i r s t be noted however t h a t n a t i o n a l income s t a t i s t i c s a r e ir- t h e process of revision. The o f f i c i a l s e r i e s of n a t i o n a l income u n i v e r s a l l y used and showing d a t a by s e c t o r i n current and constant prices -. from 1948/49 t o 1963/64 has u n t i l now been p ~ b l i s h e da n n ~ a l l y n tine G O I i Vhite Paper " timates of National Incomert nornally published i n February 2/ "l This publication shows income by s e c t o r of o r i g i n only. (See Tables 2-1 t o 2-4 in t h e Appendix t o t h i s chapter). Some a t t e n p t i s made t o sho:r current and c a p i t a l expenditure of zovernment with t h e balafice descrLbed a s p r i v a t e income. ( s e e Table 2-5. j However, a recent pxblication of the CSO Tsti- id n a t e s of Public Sector Undertakings iii India1', ~ ~ 5 l i s h e n 1963, atte,npts f o r t h e f i r s t t h e , a complete coverage of t h e ;overnment sector. ikpendi- t u r e of u~overnmentu, wheiher current o r c a p i f a l , as sliown ic t h e 0 2 f i c i a i s e r i e s of n a t i o n a l income i s i n f a c t an underste1;emerit i n t h z t it exct.udes expenditures of many of the non-departmental gwernment e c t e r p r i s e s . I n t h e conventional s e r i e s t h e contribution t o income of these e n t e r p r i s e s i s in- cluded i n t h e respective s e c t o r or' i n d u s t r i a l origin. The Public Sector Study mentioned above attempts t o combine under t h e one head of ,cvernment: expenditures of ;:overnneni; administratio:., ~ o v e r r n e n tdenartmental and non- departmental e n t e q r i s e s including those of t h e Sfyates. ( s e e Table 8-2 il: Appendix I.) 2~1. The o f f i c i a l r i a ~ i o n a lincome s e r i e s has never included a f 7 d l of expenditure c l a s s i r i c a ~ i o n n a t i o n a l income. NCI estimates of aggregate irivestnezt or savings have ever been published as an o f f i c i a l s e r i e s . Also, - t h e o f f i c i a l s e r i e s i s confined t o t h e n e t concep3 of n a t i o n a i income. Details of subsidies and i n d i r e c t taxes and of net f a c t o r income payments on e x t e r n a l account are given, s o t h a t estimates of n e t n a t i o n a l and/or domestic income a t f a c t o r c o s t and/or a t market p r i c e s can be derived, (See Tables 2-5 i n Ap~endixt o t h i s chapter.) The abscnce, however, of d e p r e c i a t i o ~ ~ estimates prevents any c a l c u l a t i o n of the gross concept of ificolne or product. -/'F iuniaclkEstimates"t h e National Income Cormitt,ee, February 1954. l a t e r I Report of - / "r~e f e r r i n g t o t h e fofn a n c i a l year j u s t a r a issued a fei:; months 2 i growth of output concladed. The t o t a l absence of an expenditure c l a s s i f i c a t i o n of national income and of the crucial variables of saving and investment comes as a shock in the Indian context, where the fourth of a s e r i e s of Five-Year Plans i s currently i n preparation. More w i l l be said about t h i s l a t e r . 21. The weakness of the o f f i c i a l s e r i e s of national income estimates has been c l e a r l y recognized by i t s authors. The Public Sector Undertakings Study i s one of the CSO1s two-pronged attempts t o improve on the o f f i c i a l s e r i e s by independently estimating specific expenditure aggregates. Thus, also the C O has been tackling calculation of an expenditure s e r i e s by S calculation of aggregate investment with a breakdown between Government and private sector. A s yet, although the C O has issued two studies S -the f i r s t as a C O document published f o r comment only in 196G/ and the S second as an unofficial paper by members of t e CSO, f o r the Fourth /" National Income Conference in November 19632 (see Section A, Appendix I ) - no investment s e r i e s has received o f f i c i a l , i.e., Government, sanction. But there i s presently the basis f o r an expenditure c l a s s i f i c a t i o n f o r a few years only from these two documents. (Our own t e n t a t i v e attempt t o S combine various estimates by the C O i n t o an expenditure s e r i e s is shown with explanatory notes i n Appendix I.) 22 . S The other l i n e of attack by the C O has been a t o t a l revision of the methods and sources used t o calculate t h e o f f i c i a l or, a s it i s more widely termed llconventionalll national income series. This was f i r s t attempted in 1961 with the publication of the llFroposals f o r a revised s e r i e s of national income estimates f o r the years 1955/56 t o 1959/60t1. This publication compares the new t'revisedn s e r i e s with the " o f f i c i a l s e r i e s t 1and shows a moderately lower absolute l e v e l of output in current prices throughout these years, inplying a lower l e v e l of per capita income, but a s l i g h t l y higher overall r a t e of growth i n constant prices, i,e., 3.G against 2,9%. The individual sector differences are of greater significance. (See Tables 2-6 t o 2-9 i n the Appendix t o t h i s Chapter and Table 2-12 i n which the r a t e s of growth given by the conventional s e r i e s are calculated with the bEssionls own estimate of growth f o r 1944/65. ) 23. The lt?roposalsll comments on the quality of the conventional national income s e r i e s . The f i r s t two paragraphs of the ~ n t r o d u c t i o & describe very succintly the reasons f o r undertaking the exercise, and, most important, the quality of the l'conventionall' series. 1/ - Estimates of Gross Capital Formation i n India f o r 1948/L9 t o 1960/61, CSO 1961. - 2/ Estimates of Capital Formation i n India f o r 1950/51 t o 1961/62, S. G. Tiwari B. K u m a r and Jagdish K u m a r . - 3/ National Income S t a t i s t i c s : Proposals f o r a Revised Series of Natbnal Income Estimates 1955/56 t o 1959/60 - Central S t a t i s t i c a l Organization, Cabinet Secretariat, Government of India, 1961.  "The estimates of n a t i o n a l incoirre prei~aredby t h e i!ati ~ ~ 2 .1lilcorilt? . U n i t and published annually i n t h e Estimates of lGationa1 Income a r e broadly based oil the concepts, methodology and t h e source material described in d e t a i l i n the F i n a l Report of t h e National Income Committee (FJIc), ( F e b n a r y , 195b). The methodology aaopted was governed more by t h e a v a i l a b i l i t y of data than by conceptual considera.tions. The main objective of t h e Committee was t o s u ~ g e s t measures f o r improving t h e q u a l i t y of d a t a and t o prepare the e s t i - mates of the l e v e l of m t j - o n a l income r a t h e r than layifig dovm a procedure f o r t h e measurement of year t o year chanses. Since 1954 the b a s i c d a t a used by t h e N I C have become out-dated and they hardly provide an adequate b a s i s f o r preparing t h e l e v e l estimates, not t o speak of t h e i r providing i n d i c a t o r s f o r s e n s i t i v e changes i n t h e aggregate n a t i o n a l income o r i t s c~mponents. The use of t h e decen- n i a l r a t e of growth i n the working f o r c e based or,; t h e 19hl ( 2 s sample) and 1951 Censos economic data f o r post-1951 period serves a s an i l l u s t r a t i o c p a r t i c u l a r l y i n t h e context of economic p l a r s i n g i n India i n which purposive e f f o r t s a r e being made t o effec3 s t r u c t u r a l chari~csi n t h e economy. "In view of the f a c t t h a t t h e current n a t i o n a l income estimates do not measure a c c u r a t e l y the char,ges i n the l e v e l of economic per- formance f o r t h e econorny as a tihole and f o r the major s e c t o r s i n it, i t was necessary t o organize t h e ;-ork of c o i l e c t i o n of a i l the data, both published and unpublished, available with tne Central and S t a t e government agecc...es, m i v e r s i t i e s and hesearch Instl.5utions :\rith a view t o securing r e l a t i v e l y :'inner empirical b a s i s f o r measl~ring more s e n s i t i v e l y , sectonrise groirtl? of n a t i o n a l income. This is what has been attempted i n these i~apers." 2I.h The G O i s o l a t e s t h e najor wealmesses of t h e ricofiventicriallln a t i o n a l income e s t k a t e s . Or?e is t h e i r dependence, f o r c e r t a i n sectors, on t h e use of t;he concept of d i s t r T ~ u t i o nof working f o r c e derived from t h e 1951 Population Census. component of t h e estimate of annual vnfue added o r income gro~rth f o r s e c t o r s dependent on t h i s working f o r c e concept, has been t h e r a t e of growth implied by comparison of t h e economic data r e s u l t s of the 1951 Census trith the 131i1 Census - %he l a t t e r consistin,< of a 2 ' sample only. The assumed :-ate of aggrezate p o p l a t i o r , zrovth as l a t e as 1-358 was lot$ 'based on comparison of the 1951 and 194l Censcs r e s u l t s . The r a t e of g r o i ~ i hshown by t h e 1961 powulatlior Census vas 2.15&. 25. The sect,ors f o r ~ ~ h i ctlh e concept a :rorkikg f o r c e i s used LO ob- l n tairi income estimates a r e : the srnall s c a l e mandacturing ei;terprises, t h e s e c t o r s Iro=,her commerce and transport", ltonstructionlll! I1professions a ~ d l.'.beral a r t s I' and ':domest i c s e r v i c e s u . The coi~i;ribiltiori of these s e c t o r s i s measured by multiplyinti t h e estimated :roricix;; f o r c e by the correspoildin,:. -a leri f i g u r e s of averaye earriings. A s estiniated i n the " c o r ~ v e n t i o l ~ as . ~ ~e s , these s e c t o r s contributed 30.6% of n a t i o n d income i n current p r i c e s i n 1?50/Sl; 31.75 in 1955/56; and 2740% i n i960/61, That, obviol~sly, t h e r e i s a l a r g e mar::in of e r r o r i n these estimaCes i s shot~n merely by t h e com- parison of annual r a t e of growth used in t h e i r c a l c u l a t i o n and t h a t a c t u a l l y assumed now from t h e 1961 Census. However, t h e problem of usirig t h e vork- i n g f o r c e c o ~ c e p ti s g r e a t e r than nerely c h a n g i q assum;ltions about r a t e s of growth of populatliori of working force. 26 . The major problem, i n very general terms, pdith using the t:orking f o r c e concept i s t h a t t h e d e f i n i t i o n of "economically active" and userni-activel' persons have changed i n each cer.sus. This i s t.rue not ofiiy of the l?k3. and 1951 Census but Is a l s o now t r u e of t h e 1 9 6 l Census. Even rdthout the changa i n coccept, the problem of d e f i n i t i o n i s made extremely d i f f i c u l t i n Ilidia :,rhere t h e r e i s considerable underemployment and seasonal e~nplo;..ment, not -Lo mention unemployment. The problems <herefore of defining and a l l o c a t i n g workirig f o r c e according t o l l e c o n o m i c a l l ~activel1 ( or use7f-su;?porting persons It) arid "nemi-active persons1' ( o r "earning dependents") pose serious ~r05lems. These problems, with t h e i r implicatioris f o r evaluation of .the l e v e l s and r a t e s of growth of t h e L1conventionals e r i e s " a r e 2uliy e m l a i n e d by the CSO: ''There a r e f i v e main stages of t h e projectlor. (of' 'workirlg f o r c e 1 by s e c t o r s ) , viz., 9) estimation of 'workir:,.l: f o r c e t f i g u r e s i n f i v e control groups, f o r 1 9 h l and 1951- from .';he ~ o p u l a t i o n census data; j i i ) logarithmic extrapolation of these Sidures t o the year of estimation; ( i i i ) redLztribution of each cor,t8roi group t o t a l t o 1?51 census occupational sub-divisions .within it i n proport i o n t o self-sunporting persoris; (i.~) re,rou?inz of census sub-2ivisions accordin2 t o the national. income i n d u s t r i a l classifica+,iori; and l (77) incorporation of currer-t eml~loymentf i,;r e s wherever available. "Tiara tynes of e r r o r s , 7:hicI-i a r i s e i n the procedure of estimation described above, can be distiriguished as t i ) a r r o r s i n the dis- t r i b u t i o n of t h e 1-351 '.lorking f o r c e ' t o the dit'ferent i n d u s t r i a l c l a s s e s due t o a i l o c a t i o n e x c l u s i v e l j on t h e b a s i s of self-suppor- ti;:::: persons acti ( i l ) e r r o r s i n a p p l y i r ? ~ the 131,1-5l decade gro~h:ll r a t e s of IrrorkLxg f o r c e 1 ir, t h e f2vo control groups t o t h e sub- sequent ;?eriod. The broad conciusions emerging from a c r i t i c a l exan~inationof t h e akove nethod of projec5ioc a r e ( a ) d i s t r i b u t i o n of the census projected t o t a l s or" '-;ror;cin& I o r c e , i n each l i v e l i - hood c l a s s among the census sub-divisione in proportion t o s e i r - supportin2 persons, lcaus t o d e v i a t l o m from current f i g u r e s since each l i v e l i h o c d c3h;s i s not nornoj<eneouti, I = com?osed . i s not . exclus>;elg seasonal k a u s k r i e s CL- r e g u l a r incius t r i e s ; (b) - Ismall enterprises. s e r i e s , 1/ n i;he coriventional income from constructiori i s included rlith  t h e y r o j e c t i o n l e a d s .to over estimation of 'working f o r c e 1 i n . r e z u l a r i n d u s t r i e s and lmder estimation i n seasonal and i n t e r - ni.Lt.ent i n d u s t r i e z The posifYion r e yardir;,; ~ e c - b o r s erin;;. i3art-iime employment cannot be g e l i e ~ a l i z s d ; c j t h e curre;-,-t off estimates of 'working f o r c e ' in r e p l a r i n d u s t r i e s a r e z e n e r a l l y c l o s e r t o t h e number of self-supporting persons r a t h e r than t h e t o t a l 'rrorking f o r c e 1 ; (d) as revealed by currefit data, employ- ment seems t o f l u c t u a t e much from year t o y e a r even i n orzanized f a c t o q r type i n d u s t r i e s and, therefore, t h e uniform growth r a t e s t derived. f ~ o nh e census based projections do not seen t o be valid; ( e ) the observed rai;e of gro~..thof 'pub!-ic f o r c e 1 (e,.<. police and posts and telegraphs) seems t o be higher than t h e assumed one, t h e same i s t r u e of t h e census sub-division 'educai;ionl and ( f ) computation of n a t i o n a l incane by income method for certairi s e c t o r s based on t h e census projection of' 'vorking f o r c e ' I s , theref ore, l i k e l y t o smooth out, t o some extent,the r e a l v a r i a t i o n s in t h e n a t i o n a l income t h a t may be observed from year t o j e a r if t h e com- d putations a r e based on c ~ r r e n t a t a on ,zainful employment, :'I/ These a r e t h e 1951 Census ileans of Livelihood classes, v i z , (f) a g r i c u l t u r e , ([ i i ) production o t h e r than cul'l;ivai;f on, ( iii) cortmerce, ( i v ) transport, and ( v ) other s e r v i c e s and miscellaneous sources. !I 27 For purposes ar" t h e llrevisedH s e r i e s the CSO does i n t r o d m e c e r t a i n nen sources of' i;a.:a . a methociological improvements a s well as i n c o r p o r a t i r i . ~ k revised estimate of working force, both f o r t h e base year l950/51 and f o r the years 1955/56 t o 1959/t;@. ( s e e Table 1-1~,) Horcever, ns tin6 GSO s a i d i11 t h e ProposaLs : ''The thirci and most important source of prospective d a t a i s , of course, t h e 1961 P o p d a t i o n Census, The concepts and d e f i n i t i o n s t o bc x e d f o r dc.i;eminb-g t h e economically a c t i v e popclation LI t h e 1961 census a r e d i f f e r e n t from the c0ncep.L of xeans of l i v e l i - hood employed i n t h e l a s t census. The proposed c l a s s i f i c a ~ ~ i o i ~ s and tabulations a l s o shos considerable departure from the 1951 patterrL, 1J Telav expect a mass of u.sef6L data or: :;.sinful erqloy- :e men'; Prom t h e s e tabliLatiocs, , ~ h i c h may n e c e s s i t a t e u ahnost ; complete r e v i s i o n of t h e preseni b a s i s of estimation & 'worldng f o r c e 1 , Ho~wver, i t Inay take about aother two years before such a r e v i s i o n can be attempted. 'I That revisioiz i s being attempted a t the p r e s e ~ ttime. Ofie of t h e n a j o r reasons f o r t h e delay in e f f e c t i n g t h a t revision, a p a r t from s h o r t q e of staff .in t h e CSO, has been t h e d i f f i c u l t i e s encountered in u e f i n i t i o n and d i s t r i b t u i o n of 1961 r.rorkhg f o r c e , because %he concepts x e d . f o r t h e questions on economic a c t i v i t y mTe very d i f f e r e n t from t h e "means of livelihoodi! concepts used i n 1951. '.ihile lihe - : ~ o r k i nf~ r c e concept; i so e s s e n t i a l , f o r -ctar;t of all a l t e r n a t i v e method, f o r c a l c u l a t i o c of estimakes of income from t h e s e c t o r s a l r e a e j mentioned, it i s a l s o a vslilabie concept f o r other types of economic analysis, 28. JIThile the distribution of working force by sector and i t s r a t e s of growth, have been i n error, a f u r t h e r problem i n calculation of income from these sectors has been the paucity of data on average earnings per head, It i s not f e a s i b l e t o enter i n t o d e t a i l s here. Suffice it t o say t h a t tile CSO appears t o have examined every possible source of data f o r these estimates and the r e s u l t s are very meagre. This i s an area i n which by r i g h t s the National Sample Survey (NSS) should have contributed data. Rore detailed treatment of the T?SS i s giver, in Chapter 4. 29. For sectors contributing some 30% roughly t o national income, the r e s u l t s , based on the working force concept can only be someh*at suspect. The individual sector t h a t contributes the l a r g e s t single proportion (about 4%) of national income i s agriculture and animal husbandry. The method of calculating income from t h i s sector together with the weaknesses of the background data are described i n Chapter 3, For the remaining sectors of national income, methods of calculating value added vary according t o the nature of the sector. The sector f o r which a v a i l a b i l i t y of s t a t i s t i c s r e l a t i n g t o production and cost of production a r e described a s I1compara- t i v e l y satisfactory1' i s the organized i n d u s t r i a l sector, i.e. net output of Factory 'r;stablishments. Estimates a r e made on the basis of net value added ( i.e. net of inputs acd of depreciation). The qilality of data f o r t h i s sector i s l i k e l y t o improve even f u r t h e r with the incorporztion of the r e s u l t s of the Annual Survey of Industries (see Chapter 4) wnose f i r s t reference year was 1959, This s e c t o r contributed, according t o the cori- ventional series, 9,4$ t o national jncome i n 1960/61, 7.8s i n 1955/56 and S.8y; i n lYSO//Si. 30 The value added approach i s a l s o used f o r the f i s h e r y sector, where, i n the revised s e r i e s the CSO attempts t o b-cild up estimates a t tne S t a t e level, mainly from data p ~ b i i s h e aby S t a t e agencies, The data used f o r calculaiion of the llconventional:f estimates a r e described as : "deficient in q~antity and quality both,'. The contributior~of t h i s sector has varied between 0.b$, 0.65 and 3.77; i n 1950/51, 1944/56 and 1960/61 respectively. Substantial revisions are made by the CSO fr, estimates of income from f o r e s t r y where the value added approacn is a l s o used and where the estimates are also b u i l t up from S t a t e l s v e l estimates. The t o t a l net, value of the "revisedIf estimates i s rou2hly double tile uconver,tionalllestimates where income from f o r e s t r y contributed 0.7$ of national incorne i n 1953/51 and 1955/56 arid 0.85 in 1960/61. The main differences i n ireailment of value added from mining and quarrying i n the "revisedH s e r i e s i s the svJitch fro?: calendar t o f i n a n c i a l year and considerable difference betueen kross snd. net output. This sector contributes about 1;; of national, incorne i n t,hc conven- t i o n a l series. 31. Two paragraphs i n the C O report sum up the methods and probleas S of estima-tinz income from house property f o r both the revised anci conventional estimates : "The contribution from 'house property1 t o national product has been reckoned a s net r e n t a l income originating k, ille o~rnership of r e s i d e c t i a l dwellings. The r e n t a l income from the non-resia- e n t i a l dwellings, on the other hand, has been alloilred t o appear  i n t h e operating p r o f i t s ~f $the e n t e r p r i s e s owning t h e i r otln bui.laings or hirln:g t h e sa.:ie frotl households. Accordin.gly tire n e t r e n t a l fi.;ures have baen derived froril t h e correspond:lng gross r z r ~ t a l f i g u r e s by cieductiilg i r o n t h e l a t t e r a l l current z:r;>enses OR r q a i r s and maintenance aiid dej;reciat,ion charges. The e x i s t i n g data on .Lhe nwiber of r e s i d e n t i a l c b ~ e l l i n s s , average r e n t per & e l l i n g , cost of r e p a i r and maintenance and depreciation can be hardly regarded a s adequate f o r preparing s a t i s f a c t o r y estimates 03 ne'c r e n t a l income from t h e 'house p r o p e r t y t s e c t o r . ttUnlikc e s t i m s t e s f o r urban house pro?erty, t h e estiniates arc f a i r l . , ~ c l o s e i n t h e zass 02 r u r a l 'house propertjrl. I n the forlner case, however, t h e revised estilnates -i!ork olrt ,such l o t ~ e r.thaii t h e conventional estimates. This I s m o s t t , due t o two reasons, v i z . ( i ) i n t h e conventional s e r i e s no ailowarice was made f o r depreciation of urban houses and ( l i j t h e a s l c h a t e s f i g u r e or urban per c a p i t a r e n t a l , according t o current a v a l i a h l e data, r,~or!:s out much lob~cr tnall th.2 figure i.nplici-& I n Lne conventional s e r i e s where t h e totcil gross r e n t a l f i g u r e i i i s ,:fven year was e s t i n a t e d Sir projecting 1S)SC-sl Pigure by relatj-ng i t t o t h e xovexent i n Lhe nc!:i.er o f houses in urban a r z a s d c r l n g t h e Jeczde lykl-Si . If 32. Fo:. t h e s e c t c r ttIncoiae from 3ariks axd Insuranceii, the CSO makes l i c t l t ; change i n me'thodolog-, since rsser;tia:l: estir:lates a r e deriveci frorn a n a l y s i s of balance s h e e t s afid p r o z i t and l o s s accour~ts t h e LPE=. The only by change introduced i s t h a t t h e CS:; 113s aldertaken an indepcuder~tanaLY!sia of non-barking, f i n a n c i a l irlterrrediaries not covered by t h e B I , i l l order t o obtain a more r e a l i s t i c estirna.Lb of t h e irlcome zenerated b.f h e s e conpanies. Ii? t h e conventioual estimates f i x e d proportions based on t h e r e s u l t s of a n a l y s i s of banklr,;;: campanlas a r e used. 'i'ne el"? e c t ox changes intro&ucad i s t o l o ~ ? z r t h e l e v e l of this s e c t o r , br a s mucl~a s 2 ;: ; 5 i n t h e conventional s e r i e s i t a c o n t r i b u t e s j u s t oY:e2 1 ;t o n a t i o ~ l l income. ; 33. C iI ~ l a r 7 Vr -:F l i t t l c change i s made i n estimates of coi~tributiic~nor" Public l i u t h o r i t i e s Sector, f o r which data a r e aivailable fr!m ana'i;:rsis of balance sneets and by econo:;lic c l a s s i f i . c a t f o n of >,udget docuneni;~. The CSO l::t~iilts out, LTC]; l b t c r confirms with I t s Stlid;;r on r u b i i c Sector Undertakings, t h a t t h e bslance s~iec.cs i 'x r t a i n ;>tiallc undertakings a r e not included i n the ~ Oave~n-nent budgets. The main ciefecL i n this s e c t o r i s es1;iimates ,sr' t h c contribution u.!' l o c a l zuLhoritias. The CSO s t a t e s : '!IC"ne a v z i l a ~ l e , data r e l a t i n g t o L ~ u n i c i p s l l t i a sd i s t r i c t joards, l o c a l boards and v i l l a g e ?ancha;yats a r s f ~rfroin satisfi~ctor:? 'because C I ~incomn1ete coveraie, l a r g e tl:e l a g and L n s d f i c i e n t d e t a i l s . The ; l a t ~ s l a v a i l a b l e crata i n respect of sorile of t h e S t a t e s r s l a t e .to 1951-52. Tn CSC r a i s e d this question a t one of t h e meetings of t n e it Central Couricil of Local S c X Governioent, a r k L i t t e i ~ t sa r c now beislg l ;;lade b : ~t h a t bod7 t o reducc! t h o %ilnr. a g throuzki t h e departments or' S l o c a l sel.2 ~ o v e r n m n ti n ~ s c h t a t e . TLz d e t e i i s of r e c e i p t s and expenditure a r b not sdequace f o r pre:?aring a e s i r s d ~ s t i m a t e s ,and henca usc of c e r t a i n proportions nave t o be resorted Lo. bdjustaents  f o r time l a g and under-coverage have a l s o t o be made. Breakdowns of c a p i t a l expenditure by type of between outlay and maintenance a r e a l s o not a v a i l a b l e and a s such have t o be estimated." 34 The balance of 2ayrflents and n e t income from abroad a c c s u l t s s ~ . e obtained I"ro;,i t h e RBI. There a r e discrepancies between the R 2 data based on.1 exchange c o n t r o l data and customs data f o r merchandise transirctions. A Cornnittee of Enquiry 1/ was established t o look i n t o these discrepancies and i n i t s r e p o r t suggestzd s p e c i f i c improvements t o both s e r i e s . The l i m i t a t i o n s of t h e RBI data a r e described by t n a t ins+,itution: llCurrent accounts: Figures f o r 'passenger f a r e s ' and other t r a n s p o r t a t i o n a r e clubbed u;:der one head transportation ' f o r our want of d e t a i l s . Except f o r 'lilvestnient i n c o ~ ~ i e ' records do not . d i s t i n g u i s h ' f a c t o r services f r o m 'non-f a c t o r ser-Jices ' Investment income alone is, therefore, t r e a t e d a s a ' f a c t o r s e r v i c e 1 and a l l . other service i t e n s a s 'nori-factor s e r v i c e s 1 It :,lay be pointed out, however, t h a t a p a r t from 'investirlen', income' no other f a c t o r service: a r e l i k e l y , i n our view, .to be of any significance i n our balance of pa:yzlent s . llCa!;ital accounts: C a p i t a l t r a n s a c t i o n s a r e shown 01ily under two broad catecjories, v i z . ' p r i v a t e 1 and ' o f f i c i a l and banking'. The former includes t r a n s a c t i o n s on account of individuals a s w e l l a s t of business ana other p r i v a t e n o n - p r d i t i n s t i t u t i o n s , r ~ i t h h e exception of loans received by p r i v a t e business under government p a r a n t e e which a r e recorded under ' o f f i c i a l ' . The second covers a l l other c a p i t a l transactions. 'I 35 The f i n a l s t e p i n t h e "revised" s e r i e s Is dezlation of t h e estimates f o r t h e commodity producing sectors; this i s done valuing current ;rears's production a t t h e base y e a r ' s p r i c e s f o r sach of t h e individual i t e n s of production. The contribution i n r e a l terms of t h e s e r v i c e ' s s e c t o r i s obtained by I1moving t h e base y e a r ' s net output f o r other years on t h e b a s i s of T a2propriate i n d i c a t o r s o physical change i n t h e volume of a c t i v i t y i n each of t h e sectorsIi. I n t h e conventional s e r i e s Lhe base year i s 1948-49 and i n t h e revised s e r i e s 1958-59. 'Jnfortunately, since a nlass of indLcators a r e used f o r d e f l a t i o n purposes and because no s u i t a b l e i n d e p e n d e ~ ~n d i c a t o r s it can be compared with t h e n a t i o n a l income d e f l a t o r , it i s v i r t u a l l y irlpossible t o check s t a t i s t i c a l l y t h e Eiccuracy oi t h e d e f l a t o r used w,r t h e CS3. That t h e def la.tor seer~isinaccurate f o r sectors, rnore s o f o r than f o r aggregate income can be i l l u s t r a t e d verbally r a t h e r than s t a t i s t i c a l l y and i s done i n paragraphs 38 and 39 below. For t e n t a t i v e i l l u s t r a t i o r , , though we a r e very much aware it i s not an appropriate d e f l a t o r , t h e :?holesale p r i c e index I s charted a g a i n s t t h a n a t i o n a l income dsf la-tor i n Appendix 1, Section C , where the sector d e f l a t o r s a r e a l s o shown. 36. It i s hoped t h a t t h e ~ 0 i i l e : ~ and deficiency of t h e conventional tj~ s e r i e s of n a t i o n a l income has been i l l u s t r a ~ e di n t h e above parasraphs. No astiinate or' .the inargln o e r r o r i s possibls. I n i t s r e p o r t published i n 1954 Z t h e National I n c ~ m Committee made such an estimate, based on data f o r t h e year n 1948-49. A o v e r a l l ciargin 02 e r r o r of 10$ f o r aggregate product was calculated - / Report of t h eControl Data, 1964. 1 and Zxchange Inforiilal "oricing Group on t h e Discrepancies between Customs  based on a combination of marsins 02 c r r o r Sy sector and t h e assuiytion of t h e coinplete indq>encle:ice af t h e s e sector e r r o r s . A s calculated b;y tile National - Incor;ii3Coriritteel/, t h e sector 2argins of e r r o r f o r '19L8-L9 could be a s follo~rls: -.. :-f:rC n r , t 1 a g r i c u l t u r e , animal husbandry and a n c i l l a r y ac-tivities . 2~ !? 2. f o r e s t r y .... .... . . . . . . . . . . 25.0 3. f i s h e r y .... . . . . . . . . . . . . . . 25.0 h. m i n i n ; ~ .... . . . . . . .... . . . . . . 30 1. 5. f a c t o r j establishments.... .... .... 10.0 .. . . . . . . . . . . .. 6. small e n t e r p r i s e s 33.3 7. communications (post, telegraph and telephone) .... 10.0 9. orzanized banking and insurance .. . . . . . . . . 00 L. 10. other com~erceand .transport .. .. . . . . . a 33.3 1 . professioris and. l i b e r a l a r t s 1 .... .... 33 3. 12. goverrment s e r v i c e s (adminis'cration) . . . . .. .. 10.0 13. domastic service . . * . .. . . . . . . . . .. 33.3 1k. house property .. .. . . . . . . . . . . . . 3-3.3 37. Oze of tlie nost respected voices India i s t h a t 02 F?rofessor o K.3. Faj, ~ h i s a l s o a member of the 1IatiLorial ii;co;lie Advisory Committee. H i s o3m comments or?, he d e f i c i e n c i e s of ?resent n a t i o n a l Licome e s t i m t e s carmot be b e t t e r e d 2 4 Professor I:aj has f o u m a i n points : i j income frorn the services s e c t o r i s under-estiimted i n t,he conventional s e r i e s : accordin:: t o the current price esti- mates, income from Iagriculture1 rose by 42.55 between 1353/51 ~; a-:d i962/63 and from mining, r r , a ~ ~ a c t u r i i .and small en5er- p r i s e s by 102.62 aver the saxe period. ThereTore t o t a l &crease i , commoditjr production i s 57s. Sut income from transport, com- r merce aid communications i s e s t i n a t e d t o nave r i s e n by oalg 55$, i.e. s l l a t l y l e s s than comodi+,y production. Professor Zaj considers income from t h i s s e c t o r t o be obvioilsly underes.Limateh, silice a t a time when l a r z e r and l a r g e r p r o p ~ r t i o n sc)f 0utpu.t a r e bein3 marlreied it i s only t o be expected t h a t service:j associated - 2/ y;-;e2ch Cc3-yered i n ljstobur 196L t o Indian Council of S?orld Kf crirs.  with marketing w i l l grow a t a f a s t e r pace than comodity production. Also, in a period when p r i c e s a r e r i s i n g , income from t r a d e a t current p r i c e s shou1.d n o t be growing more slowly than income from commodity production. ('de have been puzzled by t h e apparent lack of r e l a t i o n s h i p between the s e r v i c e s s e c t o r and t h e commodity-producing s e c t o r in t h e n a t i o n a l accounts of India. ) ii) Professor Ra j gives h i s blessing t o the I1revised" e s t i n a t e f by pointing out t h a t between 1955/56 and 1959/60, the value of output of small e n t e r p r i s e s a t current prices, according t o the conventional s e r i e s increased by only 3.86 (i.e. l e s s than 1 per annum), while according t o % the llrevised" estimates t h e increase was 24% (i.e., an average r a t e of about 6% p.a.). lde a r e i n c l i n e d t o believe, on t h e basis of i n s i s t e n t enquiries made i n India, t h a t the trend of production of t h e small e n t e r p r i s e s s e c t o r i s l i k e l y t o be influenced by the trend of production of organized industry. While the s c a r c i t y of raw materials i s s a i d t o have adversely a f f e c t e d the small-scale e n t e r p r i s e s t o a g r e a t e r degree than the organized sector, t h e l a t t e r does make production demands on the small-scale manufacturing sector, e.g. machine t o o l s and c e r t a i n inputs. Soine b r i e f d e s c r i p t i v e notes on t h i s s e c t o r a r e given i n A~pendix1 . 1 38. e W have already r e f e r r e d t o possible inadequacies of the n a t i o n a l income d e f l a t o r . Professor RaJ has two very p e r t i n e n t points on t h i s subject. iii) The following t a b l e compares t h e e f f e c t of d e f l a t i o n on the commodity and s e r v i c e s s e c t o r : - i n Income between 1950/51 and 1962/?:: Increase 3upees crores -,- a t current p r i c e s a t 1948/49 prices Commodity Production 3,650 (+57.0%) 2,290 (+39.3$) Services Sector 2,280 (+72.8$) 2,290 (+75.1$) Professor Raj agrees t h a t the p r i c e s of some s e r v i c e s such a s railway f r e i g h t r a t e s and s a l a r i e s of Government servants have n o t r i s e n a s much a s p r i c e s of commodities, but a t the same time f i n d s i t inexplicable t h a t the increase in income from s e r v i c e s should be higher a f t e r adjustment f o r the p r i c e r i s e s t h a t have occurred. The advantage, a s he points out, is t h a t d e f l a t i o n appears t o correct i n constant p r i c e s the underestima'iion i n current prices! 39. The second c r i t i c i s m of the deflated estimates made by Professor RaS i s t h a t : . 31r; \ .;;heincrease i n ir~ccmefrom agriccllture i s reduced i'rom i:2.5;'3 in curre1-L prices d u r i r , ~thc period 1950/?~ to 1962fi,3 t o 33.6, -in 1948/49 prices, , ; h i 1 income from mining, manufacturing i and small e n t e q ~ i s e s s dras.i;ica;ly reduced b,;r deflation fronl 102,65 t o 56.1$. Professor Haj s t a t e s t h a t althoudh the prices jr of mar-,ufactWed goods rose s l i ~ l ~ t lmore than those of a g i - c::lt;ural commodities, the extent of the cWfzrence in the nations:. income d e f l a t o r i s too great t o be feasible. H i s addendum i s t h a t the contributior! of small enterprises, already underestimated, i s redcced t o zero. 43 k passage from Professor Haj's speech t h a t requires quoting verbatim i ; the following: : "It requires more than ordinary, ingecuity t o make ailor,ia:lce f o r a l l these l i m i t a t i o n s of' data and jrldge rrhether the r a t e of ,zrorfhh which they indicate i s a s uridere3tina~eor an over- estimate. ; o m guess - iJhough I cannot, c l a h i t t o be arg- @ . thing more tllar. a wild guess - I s t h a t the ,ro:rth r a t e has beec underestimated t o some exterit, If tinis i s correct, the ; difference between the & compound r a t e of growth aimed a t i: ; the period 1951-1963 and the realized r a t e , would be indeed e nedlidible, 2ve;i if w assume hat tifiere has been no such ulderestimation the difference between the plaraed and realized r a t e s of gro~rthi s only per annum. I s 4l .. 3efore ieavir:, Trofessor ,%i;j, a not i r r e l e v a n t r e h d e r of h i s about the perversities of choice of terminal and sf,artirlz points f o r calcul- a t i n g &ror.l;il, is worth notin,. i'ror'essor 2 a j asks us t o forget the existence of on paper of thc dnJ~es I n d i a ' s E r s t ,hree Five-Year Plans. i ~ e pain"<- out kc, t h a t planned deve!,o'g;nerrt Segzn i n India riot i n 1951/52, but in practice iq 1?52/53. IJsing thris year* as a base he presents f o r measurement sirice then, *hree f!Plansliof f o u r r a t h e r than f i v e years each and then calculates the increase i n income i n these years, compared t o the increase i i ~ income recorded i n Plan years: Percent Increase Li2 Income 1st Flan 1351/52 - 1955/56 = + 18.5; 1952/53 - 1955/56 = + 15.2 3rd Plan ( 3 years) = about 9.5; 1960/61 - 1963/6k = + 17.6 h2 A s has been said, the IJIU of the CSO i s currently revising e s t h a t e s of riational ilxorne. The revisions can be expected t o incoryJorate the data improvements referred t o i n the l'Proposalsll. Hopefully a l s o the TJSS ~ d l be i  e able t o contribute t o increased b e t t e r data. W hope, with the CSO, t h a t more and b e t t e r data from administrative sources w i l l be available. The new estimates w i l l d e f i n i t e l y incorporate work done by the CS3 on t h e s p e c i a l s t u d i e s on s p e c i f i c aggregates, mentioned e a r l i e r , and t h a t have - been published s i n c e 1961 t h e date of publication of t h e Proposals. The main reason why the revised s e r i e s were not adopted by Government is t h a t i t was f e l t t h a t a new s e r i e s should incorporate the r e s u l t s of the 1961 Population Census, n a r t i c u l a r l y those r e l a t i n g t o working f o r c e The new s e r i e s have been expected - and promised - f o r some time; the . l a t e s t da%e f o r publication is Itin s e v e r a l monthsR time. The main reason f o r t h e delay i n what i s undoubtedly a d i f f i c u l t conceptual and s t a t i s t i c a l work is shortage of s t a f f . W understand t h a t budget e authorization has f i n a l l y been granted t o the CSOts long-standing request f o r additional staff. 43