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Implementation of the 1993 SNA in India and China: Impact and Progress

This paper explores the impact of implementing the 1993 System of National Accounts (SNA) in India and China. It discusses the scope and concepts used in the accounts, as well as the challenges and progress in implementing the revised SNA. The importance of this implementation in the world economy is also highlighted.

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Implementation of the 1993 SNA in India and China: Impact and Progress

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  1. SNA Revision (1)The 29th General conference of IARIWAugust 20-26, 2006, Juensuu, Finland Discussant Bent Thage

  2. Two papers • Impact of the SNA 1993 on India’s national accounting system and potential implications of the revised SNA by Ramesh Kolli, Ministry of Statistics and Programme Implementation, India • Recent progress in China on the SNA and challenges for the new revision by Xu Xianchun, National Bureau of Statistics, Beijing

  3. Importance in the world economy

  4. What does implementation of the 1993 SNA mean? • Scope of the accounts. (The six Milestones) • Concepts and classifications used (Limited checklist) • Basic data quality. (No explicit standard, but integral part of assessment) Later elaborated in ”minimum requirements” for having implemented the 1993 SNA and aset of ”recommended tables” (E/CN3/2001/7

  5. Implementation milestones for the 1993 SNA (Defined by the ISWGNA 1997) • GDP by industry and final expenditures in current and constant prices. • GNI and complete rest of the world account • Institutional sector accounts (1). Production accounts and complete government accounts • Institutional sector acccounts (2). All accounts down to the capital account • Institutional sector accounts (3). Financial accounts for all sectors • Other changes in assets accounts and balance sheets

  6. Moving target 1953 SNA 1968 SNA 1993 SNA 1993 SNA, Rev1 20??SNA

  7. Scope of Chinese SNA implementation • 1985 GDP production • 1989 GDP final expenditures 1992: the SNA was officially adopted in China • 1992 QNA, production only • 1992 Institutional sector acounts, including financial accounts • 1997 Balance sheets (no revaluation accounts, not so far published) • (SNA input-output tables five-yearly since 1987, latest 2002. • (Back series on SNA basis to 1952)

  8. Censuses 1992 (limited) and 2004 The 1992 tertiary industry census: GDP revised upwards 9,3 per cent Tertiary activities up with 33,1 per cent. The comprehensive 2004 census: GDP revised upwards 16,8 per cent Tertiary activities up with 48,7 per cent

  9. Revisions following the census 2004

  10. Revisions of growth rates

  11. Concepts and classifications • NA data very aggregated, both on production and expenditure sides. (COICOP and COFOG not applied) • Very summary constant price estimates. CPI widely used for deflating value added in service activities (GDDS on publication of constant price data). • Now change of base year for constant price estimates every 5 years. No plans to use chain indices. • FISIM since 2004 treated according to SNA, and allocated. • Own-produced soft-ware not identified and capialized (but purchased soft-ware since 2004 • Owner-occupied dwellings.Simplified user cost method?

  12. Problem areas [and plans to deal with them] • Lack of regular stat istics on most services [Pilot sample surveys] • No PPIs for services [Plan to establish] • QNA no expenditure side, and compiled on cumulative basis [Experimental work to change this] • Compile revaluation accounts • Input-output. Direct decomposition to be replaced by change to stablishment as basic unit. [Will be a major project]

  13. Chinese comments on three provisional recommendations for updating the 1993 SNA. • Allocation of the output of central banks (6b): Difficult to establish separate units for market and non-market operations. • Informal sector (32) Welcomes it, but it will not solve the basic data problems. • Government transactions with public corporations: Earnings from equity investment and capital injection (34) Is important in China, but it may, however be impossible to obtain the required data from government finance statistics.

  14. Scope of Indian national accounts • Annual production side (18 major industries) • Annual expenditures side • Constant prices. Major aggregates only (new base year every 5 years) • Consolidated accounts of the nation • QNA. Production side only (8 industries) • Input-output tables 5 yearly (115 sectors)

  15. SNA implementation in India • Is at level 3 of the Milestones • Fullfils ISWGNAs ”Minimum requirements” for implementation of the SNA, but not all the recommended (QNA expenditures, annual supply/use tables • Subscribes to the SDDS

  16. Plans for improvements In 2007 the following will be published: • Integrated accounts for all institutional sectors down to capital account • Cross classification of gross value added by industries and institutional sectors • QNA also expenditures (curr./const) • Annual supply and use tables • Implement COICOP and COFOG And thus reach level 4 of Milestones. No plans to reach level 5 and 6

  17. Compliance with 1993 SNA • Now mixture of 1968 SNA and 1993 SNA, but production and asset boundaries close to 1993 SNA. • In 2006 several more features of 1993 SNA introduced (for example basic prices rather than factor prices). • Own-account software not recorded • Government operations on cash basis • FISIM has been allocated to users since 60s

  18. Availability of source data • Lack of comprehensive business register • Large informal sector (mixed income 40 per cent of GDP) • In general considerable lack of annual and quarterly data • 5-yearly economic censuses and LFS • Decennial population censuses • General method: Benchmark combined with varaity of indicators.

  19. Implications of the SNA update • Plans only to deal with the issues that come under the production, income and capital accounts. • The producers of key data (RBI and MoF) and the Advisory Commmittee on National Accounts must be consulted • ”However, the compilations would also eventually be seen in terms of utility of having such detailed estimates from the point of view of policy planners” (p. 16)

  20. Possible implementation strategy • Implementation possibilities listed for all 44 provisional recommendations • 8 issues that relate to financial accounts or balance sheets are not discussed. • Employer retirement pension systems (2).Must first be recorded in the GFS. • For research and development (9) and databases (12) more information would be needed in the accounts of enterprises • Costs of ownership transfers (14). Difficult to obtain such details.

  21. Possible implementation strategy (cont.) • Miltary weapons (19). Only to the extend details are available in the budget documents • Goodwill (22) No information available on purchased goodwill • Informal sector (32). Seen as very important. Refer to the work of the Delhi Group. • Recording of taxes (35). Difficult to get information on accrual basis • Many fiscal and foreign sector issues are referred to be considered by MoF or RBI.

  22. Comments/questions • India and China have no members of the Advisory Expert group (AEG) • Which national consultation processes took place prior to responding to the UNSD consultations on the various sets of recommendtions from the AEG? • Did ressource considerations and priorities in the over-all statistical system play any role? • Which weight was given to the national possibilities to implement the provisional recommendations (although for the two countries there are no formal obligations to implement the 1993 SNA, Rev 1)? • Which processes will take place before commending on the full set of provisional resommendatios to the UNSD (deadline September 15)?

  23. Questions on two specific issues • None of the two countries have found it feasible to implement the 1993 SNA treatment of own-account production of software, as this requires functional breakdown of internal activities in the enterprises. The provisional recommendation on R&D expenditures pose the same type of data problem –how to deal with this? • Will it be possible to obtain and disseminate the information necessary for implementing the provisional recommendation on capitalizing of offensive weapon systems? • In both the above cases, would it be possible to compile back series?

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