Changes in National Income Calculation in India Since Independence part 15

 Okay, here are structured notes based on the Telugu video transcript about the evolution of National Income calculation in India.

Topic: Changes in National Income Calculation in India Since Independence

1. Introduction & Context

• Focus: Understanding the changes and evolution in methods used to calculate India's National Income since independence (1947).

• Motivation: Different methodologies and base years have been adopted over time, impacting the final figures and requiring understanding for comparison and analysis.

2. Early Estimation Efforts

• National Income Committee (జాతీయ ఆదాయ అంచనాల సంఘం):

  • Calculated National Income for the years 1948-49, 1949-50, and 1950-51.

• Central Statistics Office (CSO - సిఎస్ఓ):

  • Started regularly calculating National Income from the financial year 1951-52 onwards.

  • (Note: CSO later merged with NSSO to form NSO - National Statistical Office).

3. Major Series/Phases of Calculation

The calculation methodology has evolved through three main series based on changes in base years and economic classification:

• A. Conventional Series (సాంప్రదాయ శ్రేణులు)

  • Time Period: 1948-49 to 1964-65.

  • Base Year Used: 1948-49 (Only one base year during this period).

  • Economic Structure: Divided into 3 Broad Sectors and 13 Sub-sectors.

  • Characteristics: Reflected a more traditional economy, heavily reliant on agriculture and conventional production methods (handicrafts etc.). The specific nature of the 13 sub-sectors was different from today's classification.

• B. Revised Series (సవరించిన శ్రేణులు)

  • Time Period: Effectively covered data from 1960-61 to 1980-81 (Calculations using these base years were applied retrospectively and prospectively).

  • Base Years Used:

    • 1960-61

    • 1970-71 (Two base years used during this phase).

  • Economic Structure: Divided into 3 Broad Sectors and revised to 15 Sub-sectors.

  • Key Change: Revision in the sub-sector classification and introduction of new base years.

• C. New Series (నవ్య శ్రేణులు) - Current Framework Base

  • Time Period: 1980-81 onwards to the present.

  • Base Years Used (Updated periodically):

    • 1980-81

    • 1993-94

    • 1999-2000

    • 2004-05

    • 2011-12 (Current Base Year)

  • Economic Structure (Current Classification - Important): Divided into 3 Broad Sectors and 13 Sub-sectors.

    • Primary Sector (ప్రాథమిక రంగం):

      1. Agriculture (వ్యవసాయము)

      2. Forestry & Logging (అటవీ సంపద)

      3. Fishing (మత్స్య సంపద)

      4. Mining & Quarrying (గనులు త్రవ్వకాలు)
         (Note: Often broadly termed Agriculture Sector, but technically includes Mining)

    • Secondary Sector (ద్వితీయ రంగం):
      5. Manufacturing (ఉత్పత్తులు) - subdivided into Registered (5.1) & Unregistered (5.2)
      6. Construction (నిర్మాణాలు)
      7. Electricity, Gas, Water Supply & Other Utility Services (గ్యాస్, విద్యుత్, నీటి సరఫరా)
      (Note: Often broadly termed Industrial Sector)

    • Tertiary Sector (తృతీయ రంగం):
      8. Trade, Hotels & Restaurants (వర్తకం, హోటళ్లు, రెస్టారెంట్లు)
      9. Transport, Storage & Communication (రవాణా, నిల్వ, సమాచారం)
      10. Financing, Insurance, Real Estate & Business Services (బ్యాంకింగ్, బీమా, గృహ సంబంధిత ఆస్తులు, రియల్ ఎస్టేట్)
      11. Public Administration & Defence (ప్రభుత్వ పాలన, రక్షణ)
      12. Other Services (Community, Social & Personal Services) (ఇతర సామాజిక, వ్యక్తిగత సేవలు)
      (Note: Broadly termed Services Sector)

4. Key Concepts in Calculation

• Base Year (ఆధార సంవత్సరం):

  • Purpose: To measure the real growth of the economy by removing the effect of price changes (inflation/deflation). It allows comparison of output over time at constant prices.

  • Selection: A year considered relatively stable in terms of prices and economic activity.

• Calculation Methods:

  • India primarily uses a mix of the Production Method (Output/Value Added Method) and the Income Method.

  • Production Method: Used mainly for Primary and Secondary sectors (Sub-sectors 1 to 7, except perhaps unregistered manufacturing). Calculates the value added at each stage.

  • Income Method: Used mainly for the Tertiary/Services sector (Sub-sectors 8 to 13). Sums up factor incomes (rent, wages, interest, profit).

  • Expenditure Method: Not primarily used in India due to difficulties in accurately collecting expenditure data (large informal sector, cash transactions). Used minimally, e.g., estimating value for rural construction within Sector 6.

• Different National Income Aggregates (As discussed in the video's context):

  • GDP at Market Price (GDPmp): Often used for current year's income / headline figure. Reflects value including indirect taxes and excluding subsidies.

  • NDP at Factor Cost (NDPfc): Mentioned as the measure for the previous year's income (pre-2015 context). Net value (less depreciation) at factor incomes.

  • NNP at Factor Cost (NNPfc): Traditionally considered "National Income". Used for decadal analysis. Net value at factor incomes, excluding foreign income components reflected in GDP.

  • GNP at Market Price (GNPmp): Used for international comparisons (post-2009 context mentioned). Gross value including net factor income from abroad, at market prices.

5. Major Reforms (2011-12 Series Introduction - Jan 2015)

• Committee: K. Sundaram Committee (Prof. K Sundaram) - Officially the Advisory Committee on National Accounts Statistics (ACNAS).

• Key Changes/Recommendations Implemented:

  • Base Year Shift: Changed from 2004-05 to 2011-12.

  • Shift to Market Prices: Headline measure shifted from GDP at Factor Cost to GDP at Market Price and GVA (Gross Value Added) at Basic Prices.

    • Reason: To align with international practices and provide a better picture of economic activity including production taxes/subsidies.

    • This meant other aggregates also shifted focus (e.g., NNPmp becoming more relevant than NNPfc for certain comparisons).

  • Improved Data Sources: Incorporating MCA21 (Ministry of Corporate Affairs) database, revised IIP, updated surveys.

  • Refined Sectoral Classification: Adjustments within sectors to better capture economic activities.

6. Current Scenario

• Calculating Body: National Statistical Office (NSO), under MoSPI (Ministry of Statistics and Programme Implementation).

• Data Collection: NSO coordinates with state Directorates of Economics and Statistics (DES) and various ministries.

• Base Year: 2011-12.

• Main Aggregates Reported: GDP at Market Prices, GVA at Basic Prices.

7. Important Points Emphasized by Speaker

• The current classification of 3 sectors and 13 sub-sectors is highly important for exams.

• Understanding the purpose and use of the Base Year is critical.

• The shift towards Market Price based calculations (GDPmp, GVA basic) under the 2011-12 series is a significant change.

• While NNPfc is the traditional definition of National Income, GDPmp is the common headline figure for current performance.

• International comparisons often use GNPmp.