(p.371) Appendix A2 Limitations of the Study (Chapter 4)
(p.371) Appendix A2 Limitations of the Study (Chapter 4)
Due to the non-availability of data on the rate of return to capital, the consumption expenditure of self-employed reported individuals has been used to distribute the capital income. Here, consumption expenditure is assumed to be the proxy for their incomes and savings and the capital part of the GDP is distributed accordingly. The methodology provided in this book needs improvement; however, it provides insight into the contributions made by various SRCs to the economy and calls for affirmative action to be taken for equitable growth.
Technical Note: Selection of Sectors
In this exercise, 61 sectors of the Indian economy are identified for which data on the aggregate GDP from NAS, employment, weekly wage earnings and the monthly consumption expenditure by SRCs from NSSO are available. As per the objective of the study, GDP data with its breakup into wage and non-wage incomes is required. The CSO provides GDP data for 61 sectors of the Indian economy but the GDP breakups into wage and non-wage income only for the broad and main sectors. The sectors for which data on GDP (p.372) and its breakup into wage and non-wage is provided in the NAS are as follows:
Statement I: Broad and Main Sectors of the Indian Economy
I. Agriculture, forestry, and fishing
2. Forestry and logging
II. Mining and quarrying
IV. Electricity, gas, and water supply
VI. Trade, hotels, and restaurant
5. Hotels and restaurants
VII. Transport, storage, and communication
7. Transport by other means
VIII. Financing, insurance, real estate, and business services
10. Banking and insurance
11. Real estate, ownership of dwellings, and business services
IX. Community, social, and personal services
12. Public administration and defence
13. Other services
The GDP data, along with its wage and non-wage components for all the aforementioned sectors, is available in the NAS, CSO (statement 76.1, NAS-2011). The first step is to decompose the GDP data into wage and non-wage incomes for the following sub-sectors for which only GDP data is available.
(p.373) Statement II: Sub-sectors of the Indian Economy for Which Breakup of GDP into Wage and Non-wage Is Not Available
1. Production, processing and preservation of meat, fish, fruits, vegetables and oils
2. Manufacturing of dairy products
3. Manufacturing of grain mill products
4. Manufacturing of other food products
5. Manufacturing of beverages
6. Manufacturing of tobacco products
7. Spinning, weaving and finishing of textiles, and others
8. Wearing apparel
9. Leather and fur products
10. Wood and wood products
12. Paper, printing, and others
13. Rubber, petroleum products, and others
14. Chemical and chemical products
15. Non-metallic products
16. Basic metals
18. Metal products and machinery
19. Electrical machinery
20. Other manufacturing
21. Transport equipment
Electricity, Gas, and Water Supply
24. Water supply
Trade, Hotel, and Restaurants
25. Maintenance and repair of motor vehicles
(p.374) 26. Sale of motor vehicles
27. Repair of personal and household goods
28. Wholesale and retail trade
Transport, Storage, and Communication
29. Road transport
30. Water transport
31. Air transport
32. Services incidental to transport
Banking and Insurance
Financing, Insurance, Real Estate, and Business Services
36. Real estate
37. Renting of machinery, equipment
38. Computer and related activities
39. Legal services
40. Accounting and book keeping
41. Research and development
Community, Social, and Personal Services
43. Coaching centre
44. Medical and health
45. Membership organizations
46. Private households with employed persons
47. Washing and cleaning of textiles
48. Hair dressing and other beauty treatments
49. Custom tailoring
50. Funeral and related activities
(p.375) Decomposition of GDP into Wage and Non-wage Income
In the first step, the contribution of each of these sub-sectors to the GDP is broken down into wage and non-wage incomes using data from NAS.
For all the nine broad sectors and for 13 major sectors as listed in Statement I, the NAS provides estimates of both GDP originating in the broad sector/main sector and wage payments made in that sector. Using the basic national income identity that the sum of all factor payments is identical to the value added, it is an easy task to derive the non-wage (capital) income in each sub-sector. That is,
GDP in sub-sector − Wage payments in sub-sector = Non-wage income in sub-sector
For the decomposition of GDP of all the sub-sectors (51) for which the wage component is not available in the NAS, the wage distribution is extracted from the NSSO 66th round data. The NSSO provides information on weekly wages paid to workers in the different sectors/industries of the economy. Applying this structure to the controlled sectoral wages of the respective group/sectors as given in the NAS will give the wages for all the sub-sectors (step 1).
Based on national income identities, the wage payments in each sub-sector are then subtracted from the GDP originating in that sector to get the non-wage (or capital) income.
After decomposing the GDP into wage and capital incomes, the next step was to decompose the capital income into public and private. This has been done because the operating surplus of the public sector does not accrue to households. For all the broad 9 groups and 13 main sectors, data on the operating surplus of the public sector is taken from the NAS. The structure of the total GDP has been used to disaggregate the sectoral operating surplus within the major sectors. This sub-sectoral operating surplus of the public sector is subtracted from the sub-sectoral total non-wage income to get the private non-wage income.
(p.376) Operating surplus of public sector
GDP distributed among SRC
The total GDP distributed across different SRCs is Rs 59,22,449 crore, 96.6 per cent of the total GDP. Wage component of GDP is Rs 18,87,092 crore, which is 32 per cent of GDP and the non-wage income is Rs 40,35,357 crore, 68 per cent of GDP.
Share of SRCs in GDP of Each Sector and Sub-sector
After decomposing the sectoral and sub-sectoral GDP into wage and capital incomes, the next step was to distribute these incomes across different SRCs. The NSSO 66th Round Survey on Employment and Unemployment provides information on wage and salary earnings for individuals and monthly consumption expenditure for households in different sectors of the economy as per the National Industrial Classification (NIC-2004) codes. These data can be decomposed according to SRCs as well. These NICs (consisting of about 943 sectors) are aggregated into 61 sectors that are the focus of this study. Using this data set, the percentage share of each SRC in the income (wages and salaries) and the household monthly consumption expenditure of individuals who reported themselves as self-employed in the sub-sectors identified earlier was estimated.
Non-wage income is the major component of GDP (68 per cent); there is no data available on the rate of return to different individuals in different sectors. The NSSO provides information on household monthly consumption expenditure and the occupation (wage earners, salary earners, and self-employed) of all individuals engaged in different sectors of the economy. It is assumed that the higher the consumption expenditure, the higher will be the share in capital income.
(p.377) Combining these percentages (of wage and salary earnings and household monthly consumption expenditure) and the wage and non-wage income estimated earlier, the share of each SRC in the wage and non-wage income of the respective sector is obtained in absolute terms.
Wage payments accruing to SRC = Percentage share in wages and salaries of that community estimated from NSSO survey * Total wage payments in sub-sector estimated in Step 1.
Non-wage income of that SRC is obtained as follows:
Non-wage income accruing to SRC = Percentage share in monthly consumption expenditure of self-employed reported individuals of that community estimated from NSSO survey * Total non-wage income in sub-sector
Non-wage income in that sub-sector = GDP of sub-sector − Total wage payments in that sub-sector minus operating surplus of public sector in that sub-sector