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MEASURING SERVICES IN NATIONAL ACCOUNTS

This article discusses the challenges in measuring the gross value added (GVA) of services, as well as various estimation methods used. It covers the economic characteristics of services and provides insights into measuring volumes and value added at constant prices.

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MEASURING SERVICES IN NATIONAL ACCOUNTS

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  1. MEASURING SERVICES IN NATIONAL ACCOUNTS NATIONAL ACCOUNTS DIVISION CSO NEW DELHI, INDIA

  2. MEASURING GVA OF SERVICES • Services are the fastest growing sector. • Estimation of output and prices entails various theoretical and practical difficulties • Economic characteristics of services - intangibility and heterogeneity. • Challenges in measuring volumes or output and value added at constant prices

  3. COVERAGE

  4. VALUE ADDED SHARES * Quasi corporations are unincorporated enterprises maintaining accounts and source of data is the NSS enterprises survey.

  5. VALUE ADDED SHARES

  6. Sources of data

  7. ESTIMATING GVA ( Non –Financial Services) • Market producers : output in nominal terms is measured from the books of accounts broadly as sum of sales and changes in inventories. • Non-market producers : output is measured at nominal prices on the basis of input cost approach, as sum of inputs, compensation of employees and consumption of fixed capital(CFC) • CFC is compiled following the procedure of Perpetual Inventory method.

  8. Household sector • Bench Mark Year estimate : Estimated Labour Input and the value added per worker (VAPW) in the activity. • For subsequent years, the GVA is estimated by extrapolation using appropriate indicators relevant to the economic activity • Effective LI method used for compiling estimates in some sectors to address the issue of differential labour productivity by assigning weights to different categories of workers engaged in an economic activity based on their productivity. • Nested Cobb-Douglas function has been used for computing the weights of different categories of workers.

  9. INDICATORS USED

  10. INDICATORS USED

  11. INDICATORS USED

  12. Classification of financial corporations • Financial corporations sector are divided into nine subsectors according to its activity in the market and the liquidity of its liabilities • Central Bank • Deposit taking corporations except the central bank • Money Market Fund • Non-Money market investment fund • Other financial intermediaries except insurance corporations and pension funds • Financial auxiliaries • Captive financial institutions and money lenders • Insurance corporations • Pension Funds

  13. ESTIMATES AT CURRENT PRICES • Central Bank (RBI) - Cost method on the entire operations of the RBI. • Deposit taking corporations except the central bank- All nationalized banks, regional rural banks, other scheduled commercial banks including private and foreign banks, Cooperative credit societies etc.( financial intermediaries )

  14. Financial intermediaries • Reference Rate (RR) approach • Output = FISIM (financial intermediation services indirectly measured) + AR (actual receipts) • FISIM = (LR-RR)* average stock of loans + (RR-DR) * average stock of deposits. • RR = harmonic mean of lending rate(LR) and deposit rate (DR) for the banking sector • Intermediate Consumption (IC) = Management expenses + commission to agents + bank charges + repair and maintenance + other misc. expenses

  15. Financial intermediaries • FISIM under RR method does not include: • Interest receipts on investments and debt securities • Interest Paid on borrowing and debt securities • Net Profit on Sale of Investments • These are considered as property income and are included in savings • AR comprise of misc. income, brokerage, commission income, etc.

  16. ESTIMATES AT CURRENT PRICES • Money Market Funds • Non MMF investment Funds • Output comprises of purchase and redemption fee, exchange fees, account fees, annual fees such as management fees distribution and other fees and performance fees.

  17. Other financial intermediaries except insurance corporations and pension funds

  18. Other financial intermediaries except insurance corporations and pension funds • deposit taking enterprises (output=FISIM+explicit fees) • FISIM = FISIM on loans + FISIM on deposits • non-deposit taking enterprises (output=FISIM+explicit fees) • FISIM = FISIM on loans • In the case of others Output is the value of the explicit fees.

  19. Financial auxiliaries

  20. Captive financial institutions and money lenders • money lenders • output is FISIM : (LR- RR)/100*loan • Estimate is derived utilising the information on ratio between loans from banks and moneylenders from the All India Debt and Investment Survey and the loan information from the Reserve Bank of India. • Difficult to classify “holding companies” seperately from the MCA21 database .

  21. Insurance corporations • Output: • Premium lessreinsurance • Premium supplements : interest received + dividend received + net profit on sale of investments • Less Adjusted claims : Claims and surrenders, interest paid, net accruing liability (or change in actuarial reserves), bonus to policyholders, change in equalisation provision • Miscellaneous receipts : Business receipts + redemption receipts • Intermediate Consumption (IC) : • Management expenses, commission to agents, bank charges, repair and maintenance, other misc. expenses • GVA = Output - IC • Net accruing liability – applicable only for life insurance • Change in equalisation provision – applicable for non-life insurance

  22. PENSION FUNDS • Output is estimated as the sum of costs (i.e. intermediate consumption, compensation of employees, capital costs and other taxes less subsidies on production)

  23. ESTIMATES AT CONSTANT PRICES • Indicators used are • Total credits and total deposits of commercial banks • Total deposits and number of members – cooperative banks • Value of life fund and value of sum assured • Gross premium less claims • Indicators in nominal terms are deflated using • GDP deflator of non-financial sector • Consumer Price Index • Base year estimates is extrapolated using growth in indicators

  24. Challenges and Way forward • In the case of financial corporations , emerging areas need to be covered • Payments bank • Credit card operations • Peer-to-peer lending etc. • Data availability for a few specific types of financial enterprises, like holding corporations, brass plate units, pawnshops engaged mainly in lending, etc.need to be improved • Database on outputs and outcomes alongwith quality aspects, of different non market services like health services required for measuring real output

  25. Challenges and Way forward • Absence of suitable service price indices • Dedicated survey on services sector using a list frame that is based on list of Companies, sixth economic census and Business Registers, has been conducted as a prelude to Annual Survey of Services. This would provide a regular flow of data pertaining to the organised segment of the services sector. • Future plans of annual unincorporated surveys, surveys of services sector and Periodic Labour force surveys would provide real time data on services sector and improve the quality of estimates

  26. THANKS

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