First Revised Estimates of National Income, Consumption Expenditure, Saving and Capital Formation, 2015-16

First Revised Estimates of National Income, Consumption Expenditure, Saving and Capital Formation, 2015-16

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has released the First Revised Estimates of National Income, Consumption Expenditure, Saving and Capital Formation for the financial year 2015-16 (with Base Year 2011-12) as per the revision policy*. Second Revised Estimates for the year 2014-15 and Third Revised Estimates for the years 2012-13 and 2013-14 have also been released as per the calendar of revision of base year*. Estimates for the year 2011-12 remain unchanged.

2.         The First Revised Estimates for the year 2015-16 have been compiled using industry-wise/institution-wise detailed information instead of using the benchmark-indicator method employed at the time of release of Provisional Estimates on 31^st May, 2016. The estimates of GDP and other aggregates for the years 2012-13 to 2014-15 have also undergone revision due to use of latest available data on agricultural production; industrial production especially those based on the provisional results of Annual Survey of Industries (ASI): 2014-15 and final results of ASI: 2013-14; government expenditure (replacing Revised Estimates with Actuals for the year 2014-15) and also more comprehensive data available from various source agencies and State/UT Directorates of Economics and Statistics.

3.         The salient features of the estimates at aggregate level are indicated below:

Gross Domestic Product

4.         Nominal GDP or GDP at current prices for the year 2015-16 is estimated as Rs. 136.75 lakh crore while that for the year 2014-15 is estimated as Rs. 124.34 lakh crore, exhibiting a growth of  10.0 per cent during 2015-16 as against 10.7 per cent during 2014-15.

5.         Real GDP or GDP at constant (2011-12) prices for the years 2015-16 and 2014-15 stands at Rs. 113.58 lakh crore and Rs. 105.23 lakh crore, respectively, showing growth of 7.9 per cent during 2015-16 and 7.2 per cent during 2014-15.

Industry-wise Analysis

6.         The changes in the Gross Value Added (GVA) at basic prices in different sectors of the economy at current and constant (2011-12) prices are presented in Statements 4.1 and 4.2 respectively. At the aggregate level, nominal GVA at basic prices increased by 8.6 per cent during 2015-16 as against 10.7 per cent during 2014-15. In terms of real GVA, i.e., GVA at constant (2011-12) basic prices, there has been a growth of 7.8 per cent in 2015-16, as against growth of 6.9 per cent in 2014-15.

7.         The shares of different sectors of the economy in terms of overall GVA during 2011-12 to 2015-16 and corresponding annual growth rates are mentioned below:

Sector	Percentage share in GVA at current prices					Percentage change in GVA at constant (2011-12) prices over the previous year
	2011-12	2012-13	2013-14	2014-15	2015-16	2012-13	2013-14	2014-15	2015-16
Primary	21.75	21.36	21.50	20.76	19.83	1.2	5.2	1.8	2.6
Secondary	29.28	28.63	27.90	27.39	27.20	3.9	4.3	6.1	7.8
Tertiary	48.97	50.01	50.60	51.85	52.97	8.3	7.7	9.5	9.8
All	100.00	100.00	100.00	100.00	100.00	5.4	6.2	6.9	7.8
	Aggregate GVA (Rs. in lakh crore)
	at current prices					at constant prices
Total	81.07	92.05	103.66	114.70	124.52	85.48	90.79	97.09	104.70

8.         The growth in real GVA during 2015-16 has been higher than that in 2014-15 mainly due to higher growth in ‘agriculture, forestry & fishing’ (0.8%), ‘manufacturing’ (10.6%), ‘trade, repair, hotels & restaurants’ (11.6%), ‘transport, storage, communication & services related to broadcasting’ (9.1%) and ‘real estate, ownership of dwelling & professional services’ (12.6%), as may be seen from Statement 4.2. During 2015-16, at constant prices, the growth rates of primary (comprising agriculture, forestry, fishing and mining & quarrying), secondary (comprising manufacturing, electricity, gas, water supply & other utility services, and construction) and tertiary (services) sectors have been estimated as 2.6 per cent, 7.8 per cent and 9.8 as against a growth of 1.8 per cent, 6.1 per cent and 9.5 per cent, respectively, in the previous year.

Net National Income

9.         Nominal Net National Income (NNI) at current prices for the year 2015-16 stands at Rs. 120.83 lakh crore as against Rs. 109.61 lakh crore in 2014-15, showing an increase of 10.2 per cent during 2015-16 as against an increase of 10.7 per cent in the previous year.

Gross National Disposable Income

10.       Gross National Disposable Income (GNDI) at current prices is estimated as Rs. 139.29 lakh crore for the year 2015-16, while the estimate for the year 2014-15 stands at Rs. 126.91 lakh crore, showing a growth of 9.7 per cent as against 10.4 per cent in the year 2014-15.

Saving

11.       Gross Saving during 2015-16 is estimated as Rs. 44.05 lakh crore as against Rs. 40.98 lakh crore during 2014-15. Rate of Gross Saving to GNDI for the year 2015-16 is estimated as 31.6 per cent as against 32.3 per cent, estimated for 2014-15.

12.       The highest contributor to Gross Saving is the household sector, with a share of 59.2 per cent in the year 2015-16. However, the share has declined from 62.0 per cent in 2014-15 to 59.2 per cent in 2015-16. This decline can be attributed to decline in household savings in physical assets, which has declined from Rs. 15.78 lakh crore in 2014-15 to Rs. 14.84 lakh crore in 2015-16. On the other hand, the share of Non-Financial Corporations has increased from 34.3 per cent in 2014-15 to 37.3 per cent in 2015-16. The share of Financial Corporations decreased from 8.3 per cent in 2014-15 to 6.5 per cent in 2015-16, while the dis-saving of General Government has decreased from 4.6 per cent of Gross Saving in 2014-15 to 3.1 per cent in 2015-16.

Capital Formation

13.       Gross Capital Formation (GCF) at current and constant prices is estimated by two approaches :– (i) through flow of funds, derived as Gross Saving plus net capital inflow from abroad; and (ii) by the commodity flow approach, derived by the type of assets. The estimates of GCF through the flow of funds approach are treated as the firmer estimates, and the difference between the two approaches is taken as “errors and omissions”. However, GCF by industry of use and by institutional sectors does not include “valuables”, and therefore, these estimates are lower than the estimates available from commodity flow approach.

14.       Gross Capital Formation (GCF) at current prices is estimated as Rs. 45.45 lakh crore for the year 2015-16 as compared to Rs. 42.58 lakh crore during 2014-15. The rate of GCF to GDP declined from 34.2 per cent during 2014-15 to 33.2 per cent in the year 2015-16. The rate of GCF excluding valuables to GDP stands at 32.6 per cent and 31.8 per cent for the years 2014-15 and 2015-16 respectively. The rate of capital formation in the years 2011-12 to 2015-16 has been higher than the rate of saving because of net capital inflow from Rest of the World (ROW).

15.       In terms of the share to the total GCF (at current prices), the highest contributor is Non-Financial Corporations, with the share rising steadily from 45.7 per cent in 2011-12 to 51.3 per cent in 2015-16 (Statement 9). Share of household sector in GCF is also significant, but has declined from 43.4 per cent in 2011-12 to 34.7 per cent in 2015-16. The share of General Government in GCF has increased from 9.6 per cent in 2011-12 to 12.4 per cent in 2015-16.

16.       Within the Gross Capital Formation at current prices, the Gross Fixed Capital Formation (GFCF) amounted to Rs. 39.89 lakh crore in 2015-16 as against Rs. 37.62 lakh crore in 2014-15.  The rate of GFCF to GDP at current prices was 29.2 per cent in 2015-16 as compared to 30.3 per cent in 2014-15. The change in stocks of inventories, at current prices, increased from Rs. 2.78 lakh crore in 2014-15 to Rs. 2.92 lakh crore in 2015-16, while the valuables decreased from Rs. 2.09 lakh crore in 2014-15 to Rs. 1.97 lakh crore in 2015-16.

17.       The rate of Gross Capital Formation to GDP at constant (2011-12) prices has decreased from 35.8 per cent in 2014-15 to 35.5 per cent in 2015-16.

Consumption Expenditure

18.       Private Final Consumption Expenditure (PFCE) at current prices is estimated at Rs. 79.00 lakh crore for the year 2015-16 as against Rs. 72.73 lakh crore in 2014-15. In relation to GDP, the rates of PFCE at current prices during 2014-15 and 2015-16 are estimated at 58.5 per cent and 57.8 per cent respectively.

19.       At constant (2011-12) prices, the PFCE is estimated as Rs. 59.31 lakh crore and Rs. 63.66 lakh crore, respectively for the years 2014-15 and 2015-16. The corresponding rates of PFCE to GDP for the years 2014-15 and 2015-16 are 56.4 per cent and 56.1 per cent respectively.

20.       Government Final Consumption Expenditure (GFCE) at current prices is estimated as Rs. 14.12 lakh crore for the year 2015-16 as against Rs. 12.98 lakh crore during 2014-15. At constant (2011-12) prices, the estimates of GFCE for the years 2014-15 and 2015-16 stand at Rs. 10.72 lakh crore and Rs. 11.03 lakh crore respectively.

Estimates at per capita level

21.       Per Capita Income, i.e., Per Capita Net National Income at current prices, is estimated as Rs. 86,513 and Rs. 94,178 respectively for the years 2014-15 and 2015-16.  Correspondingly, Per Capita PFCE at current prices, for the years 2014-15 and 2015-16 is estimated at Rs. 57,402 and Rs. 61,571 respectively.

22.       More details of these estimates are available in Statements 1-9 appended to this Press Note.

Summary of Revision in the GDP Estimates

23.       The use of latest available data from various agencies have resulted in some changes in both the levels of GVA and growth estimates for the years 2012-13 to 2015-16. The reasons for revision in the estimates of the years 2012-13 to 2014-15, released on 29.01.2016 are mentioned in the Annexure.

Revision in the estimates of 2015-16:

24.       The following statement gives the major reasons for variation between the Provisional Estimates (released in May 2016) and the First Revised Estimates of GVA for 2015-16.

Sector	GVA growth in 2015-16		Major reasons for  variation
	Prov. Estimate, May 2016	First Revised Estimate, Jan 2017
Primary[i]	2.2	2.6	Revision in estimates of production of some crops, livestock products, fish and forestry products; and use of annual financial reports of public & private sector companies in place of IIP in the case of ‘mining & quarrying’.
Secondary[ii]	7.4	7.8	Actual analysis of financial reports of a larger sample of public & private sector companies instead of key financial indicators derived from advance filings of a small sample of Companies used earlier.
Tertiary[iii]	8.9	9.8	Use of Revised Estimates of sales tax and other items in central & state government budget documents instead of Budget Estimates; and replacement of key financial indicators derived from advance filings of a small sample of Companies with actual analysis of financial reports of a larger sample of public & private sector companies.
Total	7.2	7.8

Upcoming Releases

25.       The upcoming releases on GDP are indicated below:

a)      Second Advance Estimates for the year 2016-17, along with quarterly estimates for Q1 (April-June), Q2 (July-September) and Q3 (October-December) of 2016-17 on February 28, 2017; and

b)      Provisional Estimates for the year 2016-17, along with estimates for all the four quarters of the year on May 31, 2017.

*****************

NOTES ON THE STATEMENTS

1.      List of Statements

1.      Statement 1.1: Key aggregates of national accounts at current prices

2.      Statement 1.2: Key aggregates of national accounts at constant (2011-12) prices

3.      Statement 2: Per Capita Income, Product and Final Consumption

4.      Statement 3.1: Output by economic activity and Capital Formation by industry of use at current prices

5.      Statement 3.2: Output by economic activity and Capital Formation by industry of use at constant (2011-12) prices

6.      Statement 4.1: Gross Value Added by economic activity at current basic prices

7.      Statement 4.2: Gross Value Added by economic activity at constant (2011-12) basic prices

8.      Statement 5: Finances for Gross Capital Formation

9.      Statement 6.1: Gross Capital Formation by industry of use at current prices

10.  Statement 6.2: Gross Capital Formation by industry of use at constant (2011-12) prices

11.  Statement 7.1: Gross Fixed Capital Formation by asset & institutional sector at current prices

12.  Statement 7.2: Gross Fixed Capital Formation by asset & institutional sector at constant (2011-12) prices

13.  Statement 8.1: Private Final Consumption Expenditure at Current Prices

14.  Statement 8.2: Private Final Consumption Expenditure at Constant (2011-12) Prices

15.  Statement 9: Institutional Sectors – Key economic indicators at current prices

Annexure: Reasons for revision in the estimates of the years 2012-13 to 2014-15

NOTES ON THE STATEMENTS

ACRONYMS USED IN THE PRESS RELEASE

CE:      Compensation of Employees

CFC:   Consumption of Fixed Capital

CIS:     Changes in Stock

GCF:   Gross Capital Formation

GDI:    Gross Disposable Income

GDP:   Gross Domestic Product

GFCE: Government Final Consumption Expenditure

GFCF:             Gross Fixed Capital Formation

GNDI:             Gross National Disposable Income

GNI:    Gross National Income

GVA: Gross Value Added

MI:      Mixed Income

NDP:   Net Domestic Product

NNDI:             Net National Disposable Income
NNI:    Net National Income

OS:      Operating Surplus

PFCE:             Private Final Consumption Expenditure

ROW: Rest of the World

FORMULAE

1.      GVA at basic prices = CE + OS/MI + CFC + Production taxes less Production subsidies

2.      GDP = ∑ GVA at basic prices + Product taxes - Product subsidies

3.      NDP/NNI = GDP/GNI - CFC

4.      GNI = GDP + Net primary income from ROW (Receipts less payments)

5.      Primary Incomes = CE + Property and Entrepreneurial Income

6.      NNDI =NNI + other current transfers from ROW, net (Receipts less payments)

7.      GNDI = NNDI + CFC = GNI + other current transfers from ROW, net (Receipts less payments)

8.      Gross Capital Formation= Gross Savings+ Net Capital Inflow from ROW

9.      GCF = GFCF + CIS + Valuables + “Errors and Omissions”

10.  Gross Disposable Income of Govt. = GFCE + Gross Saving of General Government

11.  Gross Disposable Income (GDI) of Households = GNDI – GDI of Govt. – Gross Savings of All Corporations

REMARKS ON THE FORMULAE:

1.      Production taxes or subsidies are paid or received with relation to production and are independent of the volume of actual production. Some examples are:

Production Taxes - Land Revenues, Stamps and Registration fees and Tax on profession

Production Subsidies - Subsidies to Railways, Subsidies to village and small industries

2.   Product taxes or subsidies are paid or received on per unit of product. Some examples are:

Product Taxes: Excise Tax, Sales tax, Service Tax and Import and Export duties

Product Subsidies: Food, Petroleum and fertilizer subsidies

7.   Other Current Transfers refers to current transfers other than the primary incomes

8.   Estimate of GCF derived from this formula is taken as the “firmer” estimate and the difference between this estimate and the sum of GFCF, CIS and valuables is taken as “errors and omissions”, as referred in 9 above.

Apparel and Leather industry key to generation of formal and productive jobs

Apparel and Leather industry key to generation of formal and productive jobs: Economic Survey 2016-17

Economic Survey recommends reforms in labour and tax policies to make the Apparel and Leather sector globally competitive

Apparel and Leather & Footwear sectors are eminently suitable for generating jobs that are formal and productive, providing bang-for-buck in terms of jobs created relative to investment and generating exports and growth. This was stated in the Economic Survey 2016-17 presented by the Finance Minister Shri Arun Jaitley in the Parliament today. The Survey adds that these sectors provide immense opportunities for creation of jobs for the weaker sections, especially for women, and can become vehicles for broader social transformation in the country.
The Survey highlights the opportunity for India in this sector in global context by saying that India has an opportunity to push exports since rising wage levels in China has resulted in China stabilizing or losing market share in these products. India is well positioned to take advantage of China’s deteriorating competitiveness due to lower wage costs in most Indian states, it adds.
The Survey also lists a number of challenges faced by these sectors. It says that the space vacated by China is fast being taken over by Bangladesh and Vietnam in case of apparels and Vietnam and Indonesia in case of leather and footwear, while Indian companies struggle in face of a set of common challenges related to logistics, labour regulations, tax & tariff policy and disadvantages emanating from the international trading environment compared to competitor countries.
On logistics, the Survey says that costs and time involved in getting goods from factory to destinations are greater in India than those for other countries. On labour costs, India’s source of comparative advantage in this sector, also seem not to work in its favour due to problems like regulations on minimum overtime pay, onerous mandatory contributions that become de facto taxes for low-paid workers in small firms that result in a 45 per cent lower disposable salary, lack of flexibility in part-time work and high minimum wages in some cases.
According to the Survey, in both apparel and footwear sectors, tax and tariff policies create distortions that impede India gaining export competitiveness. India imposes a 10 percent tariff on man-made fibers vis- a-vis 6 percent on cotton fibres. On the other hand, domestic taxes also favor cotton-based production rather than production based on man-made fibers, and leather footwear rather than non leather footwear. The global demand for apparel is moving from cotton fibre products to manmade fibre and similarly footwear of non leather, it adds. India’s competitors enjoy better market access by way of zero or at least lower tariffs in the two major importing markets, namely, the United States of America (USA) and European Community (EU), the Survey says.
Another problem faced by the leather sector highlighted by the Survey is that despite having a large cattle population, India’s share of cattle leather exports is low and declining due to limited availability of cattle for slaughter in India.
The Survey suggests several measures to make these sectors globally competitive and unlock its potential for creating new jobs and generating growth. It recommends that there is a need to undertake rationalization of domestic policies which are inconsistent with global demand patterns.
.Several measures have been initiated that form part of the package approved by the Government for textiles and apparels in June 2016, the Survey notes. Accordingly, textile and apparel firms will be provided a subsidy for increasing employment, but these need to be complemented by further actions such as the following:
• An FTA with EU and UK in the case of apparel will offset an existing disadvantage by India’s competitors- Bangladesh, Vietnam and Ethiopia. In the case of leather and footwear, the FTA might give India an advantage relative to competitors. In both cases, the incremental impact would be positive.
• The introduction of the GST offers an excellent opportunity to rationalize domestic indirect taxes so that they do not discriminate in the case of apparels against the production of clothing that uses man-made fibers; and in the case of footwear against the production of non-leather based footwear.
• Third, a number of labor law reforms would encourage employment creation in these two sectors.

In creating one Economic India, Technology, Economics and Politics are Surging Ahead

In creating one Economic India, Technology, Economics and Politics are Surging Ahead

Survey suggests that it is Time for the Laws to catch up and facilitate this Internal Integration

Finance Minister Shri Arun Jaitley today presented the Economic Survey 2016-17 in the Parliament today. The Survey suggest that on the question of creating one economic India, technology, economics and politics have been surging ahead. Perhaps, it is time for the laws to catch up to further facilitate this surging internal integration.
It finds high levels of internal trade between states: India’s internal trade-GDP ratio at about 54 percent is comparable to that in other large countries. The extent to which the Constitutional provisions facilitate the creation of one economic India is discussed in a final section.
The first-ever estimates for inter-state trade flows indicate that cross-border exchanges between firms amount to at least 54 per cent of GDP, implying that domestic trade is significant. Both figures compare favourably with other jurisdictions: de facto at least, India seems well integrated internally. A more technical analysis confirms this, finding that trade costs reduce trade by roughly the same extent in India as in other countries.
The Survey shows that :-
• Smaller states Uttarakhand, Himachal Pradesh and Goa trade more; the net exporters are the manufacturing powerhouses of Tamil Nadu, Gujarat, and Maharashtra
• Otherwise agricultural Haryana and Uttar Pradesh are also trading powerhouses because Gurugram and NOIDA, respectively, have become part of the great Delhi urban agglomeration.
• Intra-firm trade across States is surprisingly large (about 68 per cent of inter-firm inter-state trade), and is affected by trade costs to a greater extent than inter-firm trade.
However, there is a potential dampener on the finding that trade in goods is high within India. The high level may be a consequence of the current system of indirect taxes which in some important cases perversely favours inter-state trade over intra-state trade. If true, the GST by ironing out these oddities will normalise inter-state trade in the country. This may reduce trade in some cases, and yet have a positive impact on tax revenue because of improvements in compliance, competitive enhancements and other channels.
It may be noted the Indian Constitution provides the Centre and States considerable freedom to restrict trade and commerce; the needs of creating one economic India were actually subordinated to the imperatives of preserving sovereignty for the states. In practice, courts’ interpretation of these constitutional provisions have also been in favour of protecting the sovereignty of states over economic integration.

Real per capita GSDP between 1983 and 2014, shows across-the-board improvement

Real per capita GSDP between 1983 and 2014, shows across-the-board improvement: Economic Survey 2016-17

Improved health indicators in life expectancy

Striking over performance of Indian States in fertility decline

Shri Arun Jaitley presents the Economic Survey 2016-17

The Union Finance Minister Shri Arun Jaitley presented the Economic Survey 2016-17 in the Parliament today. The Economic Survey states that while economic performance has been remarkable in the aggregate, India’s success as a federation depends on the progress of each of its individual states. What is a reasonable standard for assessing how well the states are doing? One intuitive metric is to see how well individual states have done over time on two sets of indicators: economic indicators, such as income and consumption, and health/demographic indicators such as infant mortality rate, life expectancy, and total fertility rate. Our analysis of these indicators begins in the 1980s, when the structural break from the previous era of the “Hindu Growth Rate” occurred.
The Economic Survey states that seeing only the shift in the levels of these indicators does not give us the full picture because there is no benchmark for relative assessment. Here, economic theory provides us a useful metric: convergence (or unconditional convergence). Convergence means that a state that starts off at low performance levels on an outcome of importance, say the level of income or consumption, should grow relatively faster over time, improving its performance so that it catches up with states which had better starting points.
The Economic Survey mentions that when studying real per capita GSDP over time between 1983 and 2014 ,there has been a clear increase in levels indicating an across-the-board improvement. For example, between 1984 and 2014, the poorest state (Tripura, with a per capita income of INR 11,537 in 1984 to INR 64,712 in 2014) increased its per capita GDP 5.6 fold; the median state (Himachal Pradesh) increased its income level 4.3 fold.
The Economic Survey mentions that, when convergence in real per capita GDP is studied for the latest decade (2004-2014), it is found that while incomes converge for provinces in China and for countries in the world, in India, they diverge. When convergence in real per capita consumption for states in India is studied, the same trend of divergence is observed. Despite growing rapidly on average, there is sign of growing regional inequality among the Indian states. This is puzzling because the underlying forces in favor of equalization within India—namely strong and rising movements of goods and people—are strongly evident. This is not found to be the case in the previous decade (1994-2004), when we see that incomes in China, India and the world were all diverging/weakly converging.
The Economic Survey elaborates that to observe convergence, we should see a downward sloping line – this means that the countries/provinces/states that start off poorer subsequently grew faster, closing the gap with more developed countries/states. The opposite is happening in India.
The Economic Survey states that a similar trend of consumption divergence is observed within India for the three time periods of 1983-1993, 1993-2004 and 2004-2011. All this suggests that over time, regional income/consumption inequality in India is not narrowing despite such gaps narrowing across countries in the world and within China. The Indian paradox is doubly confounding: thicker international borders that are more impervious to the equalizing flows of factors if production lead to convergence but the supposedly porous borders within India perpetuate spatial inequality.
The Economic Survey further states that one possible hypothesis for seeing a regional dispersion in income and consumption is that there might be governance traps that impede the catch-up process. And if there are such traps, labor and capital mobility might even aggravate underlying inequalities. But why such traps persist if competitive federalism is forcing change upon the lagging states remains an open question.
The Economic Survey remarks that in contrast, on health, there is strong evidence of convergence amongst the states in the 2000s. But here it is the international contrast that is striking. With regards to life expectancy, the Indian states are close to where they should be given their level of income. But that is not true of IMR (Infant Mortality Rate), suggesting that the “mother and child” (discussed also in last year’s Survey) bear the brunt of weaker delivery of health services.
The Economic Survey states that but what really stands out in the international comparison is fertility (measured using Total Fertility Rate), where we find that for their levels of development, the Indian states have much lower levels of fertility than countries internationally. These unusually large declines in fertility have strong—and potentially positive—implications for India’s demographic dividend going forward.

*****