Overview of System of National Accounts (SNA) II. Introduction to SNA

1. Overview of System of National Accounts (SNA)II. Introduction to SNA UN Statistical Institute for Asia and the Pacific

2. Definition of Output • Value of goods & services which are produced by an establishment in the economy • Losses or wastages in production and distribution not counted • For goods taking more than one year to produce, work-in-progress is recorded • For trade services, it is the margin realized from sale of a good purchased • For banks, it is the implicit and explicit service charge, which are only a small part of interest charges

3. Definition of Output continued.. For • Insurance – it is the service charge • Non-market products – it is the production cost • General government • NPIs • Own account constructions • Own account R&D • Own account software development

4. Definition of Intermediate consumption • Goods & services which are entirely used up for production • Durable goods which have low values (country specific) • Excludes other costs such as labour, financial cost and production taxes • these are treated as income generated • part of value added

5. Definition of Final consumption • Goods & services used by households or community. • FCE (final con exp) of households • FCE of general government • FCE of NPIs serving households • For households all durables are part of final consumption (except purchases , own construction or improvements of residential buildings, which are part of GCF) • Service of owner occupied dwellings are FC • Payment for licenses, passports, permits ..

6. Definition of Imports and Exports of Gs & Ss

7. Residents and non-residents • Military and civil servants, diplomats employed by a country are residents of the country who employ them • Students are residents of country of origin regardless of time of study • International org are neither in National economy, but workers are residents in the country if abode for at least one year.

8. Definition of Gross fixed capital formation • Investment in Capital goods • Measures the additions to the capital stock of buildings, equipment and inventories.. • ie the addition to the capacity to produce more in the future • Land, natural resources etc are not, because the change of ownership will not increase the non-produced assets (cost of transfer only included) • Components: • Gross fixed capital formation • Changes in inventories • Acquisition less disposals of valuables (jewelry..)

11. Gross / Net Domestic Product (GDP / NDP) • The Capital Stock (Produced resource in the form of buildings, infrastructure, machinery & equipment) attracts Consumption of Fixed Capital (CFC) in the process of production • Net Domestic Product (NDP) is obtained from GDP by subtracting the CFC • NDP = GDP – CFC • GDP = NDP + CFC

12. National vs. Domestic Concept • Some productive activities of residents take place abroad • Some primary income generated within country may go to Non-resident units • Symmetrically some primary incomes generated in the rest of the world (ROW) may go the resident units

14. GNDI

15. National vs. Domestic Concept • Gross Domestic Product plus primary incomes receivable from ROW less primary incomes payable to ROW = Gross National Income (GNI) • GDP / NDP + Net primary income earned from abroad = Gross / Net National Income (GNI / NNI)

16. Gross National Disposable Income (GNDI)- Concept • All GNI is not available for final uses domestically • Some of the income is transferred to other countries, and vice-versa • Gross National Disposable Income (GNDI) = GNI + current transfers from the ROW - current transfers to the ROW

18. Gross National Disposable Income (GNDI)- Concept(Contd.) • Gross national disposable income is the income available for consumption and saving • Gross National Disposable Income (GNDI) = Final Consumption Expenditure + Gross Saving

20. Gross Saving, Gross Capital Formation & Net Lending Gross Saving = GNDI - Final Consumption Gross saving together with net capital transfers from ROW provides resources for investment in non-financial assets (called Gross Capital Formation)

21. Gross savings

22. Gross Saving, Gross Capital Formation & Net Lending (Contd.) Gross Saving + net Capital Transfers from ROW + net borrowing / (-net lending) = Gross Capital Formation +Non-produced assets (Patented entities only)

23. Gross Saving, Gross Capital Formation & Net Lending (Contd.) Gross Capital Formation = Gross Fixed Capital Formation + Change in Stocks (Gross saving + net capital transfers) – GCF = Net lending (+) / Net borrowing (-)

24. National Income (NI ) • Gross National Income (GNI) = GDP + primary incomes receivable from ROW - primary incomes payable to ROW • GNI is at market / basic price depending upon the inclusion / exclusion of taxes on products less subsidies in GDP

25. National Income (NI ) ...contd. • GNI -CFC = NNI (Net National Income) • Per capita income = NNI divided by mid year population

26. Definition of an asset • The assets recorded in the System are economic assets: • ownership rights can be enforced • economic benefits may be derived by holding them, or using them, over time • It is a store of value that depends upon the amounts of the economic benefits that can be derived from it by its owners.

27. Definition of an asset (cont) This value (discounted for inflation) does not usually remain constant but often diminish with the passage of time. (a) Using assets such as machinery in production Different kinds of benefits may be derived such as (b) Property incomes: for example, interest, dividends, rents, etc., received by the owners of financial assets and non-produced assets; (c) Some assets may be held purely as stores of values (precious metals or stones, etc.) without any other benefits being derived from them.

28. ASSETS BOUNDARY OF 1993 SNA • Assets as defined in the 1993 SNA are entities that must be owned by some institutional unit or unit (s) • and from which economic benefits are derived by their owner (s) by holding or using them over a period of time

29. Asset boundary • All entities which meet the definition of an asset appear on the balance sheet of the economy. • All assets can be represented by a monetary value • Value represents the market’s view of the total of the benefits embodied in the asset.

30. Types of assets Produced • It exists, like land and sub-soil assets; or • Appears over time and is valued/recognised when there is an equivalent market price • Enter via production or imports • Leave via being exhausted, sold to residents for use other than as asset, sold to non-residents Non-produced • May leave via depletion or impairment

31. ASSETS BROAD CLASSIFICATION Financial Assets Produced Non-Financial Non-Produced

32. Assets in the 1993 SNA Financial assets Non-financial assets Produced Non-produced Fixed Inventories Valuables Tangible Intangible Tangible Intangible - Land - Subsoil assets - Non-cult biological resources - Water resources - Patented entities - Leases and contracts - Purchased goodwill - Buildings - Structures - Machinery & Equipment - Mineral exploration - Computer software - Entertainment, literary or artistic originals - Other

33. Assets in the SNA update Financial assets Non-financial assets Non-produced Produced Fixed Inventories Valuables Goodwill and marketing assets Contracts, leases and licenses Natural resources • R&D • - Mineral exploration and evaluation • - Computer software and databases • - Entertainment, literary or artistic originals • - Other IP products - Natural land - Mineral dep & energy reserves - Non-cult biological resources - Water resources - Other natural resources Buildings Structures Machinery & Equipment

34. NATIONAL ACCOUNTS All transactions within a time period Between the economic agents Constituting the national economy

36. NATIONAL ACCOUNTS (Contd.)Sequence of accounts Production Changes in Balance Sheet P Primary Distribution of Income Financial Capital Secondary Distribution of Income Use of Income

38. NATIONAL ACCOUNTS All transactions within a time period Between the economic agents Constituting the national economy

39. NATIONAL ACCOUNTS (Contd.)Economic Agents Households P Non-Financial Corporations Non-Profit Institutions Serving Households Financial Corporations ROW General Government

40. NATIONAL ACCOUNTS All transactions within a time period Between the economic agents Constituting the national economy

41. Account for the rest of the world (ROW) • Principles: • Transactions recorded from the perspective of ROW • All transactions are recorded twice, as receivables in the domestic economy and as payable in the ROW account and vise versa. (eg: current transfers receivable from ROW in Domestic economy is recorded as payable to ROW in ROW account)

44. Goods and services account • Characteristics: • Brings together total supply and uses of Gs & Ss • It is balanced by itself • Resources recorded on the right side and uses on the left side