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Write a note on Evolution of national income accounting in India.

Write a note on Evolution of national income accounting in India.

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Evolution of National income accounting in India: Pre-Independence Period: In India, first national income estimate was given by Dadabhai Naoroji in the year 1867-1868. Afterwards many estimates were formulated by different peoples. Following table summarizes the details about the important estimates prepared by different researchers.

Estimates of National Income Before IndependenceEstimates of National Income Before Independence

Since the estimates were prepared by different researchers of different time, the method of estimation varies with geographical coverage. Conceptually too the estimates were divergent. In addition the estimates were based on current price and for a meaningful comparison the adjustment of price change needs to be dealt with. Estimates were also limited by data availability, like data of agricultural sector was unreliable inspite of all the limitations, the efforts of individual researchers are highly appreciable.

Post-Independence Period:

National Income Committee: After independence, planning and policy were the major task of the government for which official estimates of national accounts are requisite. In order to accomplish it, a committee named National Income Committee was formulated by Government of India in August 1949 under the Chairmanship of P.C. Mahalanobis with D.R. Gadgil and V.K.R.V. Rao among the members. The aims of committee were to recommend, compilation of estimates of national income, improvement in statistical data. It was also meant to promote research in the field of national income. National Income Unit (NIU) was set up as a helping hand to the committee. This committee provided the first estimates of national income for the entire union. The report and estimates were published by the ministry of fiance in 1951 (first report) and 1954 (final report). It also recommended the annual preparation of national income estimates on regular basis..

Government of India accepted the report and handover the work to finance ministry. Later on, the work of preparation of estimates were transferred to CSO and a National Accounts Division (NAD) was created (it was earlier known as National Income Division). The first official estimates according to the guidelines of the committee were published by CSO with base year 1948-49 in year 1956 in estimates of National Income. This series was known as conventional series.

Revised Series with base 1960-61: Over the time, various studies were conducted on how to improve the source of data, suitability of method etc. with improvement in availability of data over years a review of methodology of national income estimates was done and base year was shifted from 1948-49. Special efforts were done for a comprehensive review of all available data whether published or unpublished. The first result of efforts was presented in the National income statistics proposals for a revised series for estimates 1955-56 and 1959-60.

This report was sent to various researchers and institutions for their comments. After the study is completed, the proposals as amended/improved estimates as per the revised series were published in the brochure on the revised series of national produce 1960-61 to 1964-65 (CSO, 1967). Two more developments also took place during the time, first, NIU was renamed as NID (National Income Division) and second, the revised series referred national income as national product the main improvements in the revised series were related to:

  • Agriculture estimate is the aggregate of all the state-wise estimate of all India were now based on fully revised estimates of outputs, revised yield rates of minor crops, livestock products, and wider empirical base for price data.
  • 1960 as a base have been used in large scale manufacturing where the data was provided by annual survey of industries.
  • In construction sector, income approach replaced the expenditure and commodity flow approach.
  • Public administration and defence.
  • Real estate and ownership of dwelling, where the estimates were prepared on the basis of number of residential houses reported in 1961 census.
  • Unorganized sectors like transport other than railways, trade, hotels and other services.

Afterwards two other brochures first, estimates of savings in India, 1960-61 to 1965-66 and second, estimates of capital formation in India – 1960-61 to 1965-66 were published by CSO in 1969. Saving estimates divided the economy into threes sectors, public sector, private corporate sector and household sector. Capital formation estimate provided estimates both at current price and 1960-61 prices for construction, machinery & equipment and changes in stocks.

The title of estimates also changed to National Accounts Statistics (NAS) with effect from 1975. To help the user, a special supplement “National Account Statistics, 1960-61 to 1972-73” – Dis aggregated tables (CSO, 1975) was published including the dis aggregated tables on output, input, value added, saving etc. few years later all the tables in supplement became regular feature of the NAS.

Revised Series with base 1970-71: The base year of the revised series shifted to 1970-71 from 1960-61 and the estimates of new revised series were published in NAS, January 1978. These estimates were based on the latest available data on population census, livestock surveys etc. undertaken by NAD. “National Accounts Statistics: Sources and Methods, April 1980” was published covering the details of methodology of estimation.

New Series with base 1980-81: The series was again revised and CSO released a new series with 1980-81 as base year in February 1988. It was formulated after a comprehensive study of data base and methodology of estimation. The improvements proposed were discussed deeply in the Pune Seminar and Conference of the Indian Association for Research in National Income and Wealth (IARNIW) held in December, 1984 and 1985 respectively. More emphasis was made on the use of the current data as much possible. The estimates were initially published in February 1988, for 1980-81 to 1985-86. Here also a special publication discussing the details of estimation methodology was published (National Accounts Statistics—Sources and Methods, 1989).

Revised series of national accounts with 1993-94 as base: the new series with 1993-94 replaced the earlier series with base 1980-81.

The following revisions were affected in the series:
  • New estimates on work force based on NSSO surveys were used for estimates of income from unregistered manufacturing.
  • Many sectors were diversified by including more products.
  • Improvement in coverage of existing products.
  • Methodological improvement in applying new indicator of constant price estimates for banking and insurance.
  • Change in data generated from annual survey of industries (ASI) by reducing the time lag in the availability of data from 3 years to 9-10 months.

CSO has decided to change the base every five years. Also, the data in the revised series is only for the period 1993-94 to 1997-98.