Have we been overcounting the output of our informal sector?

The statistical methods in use suggest that value addition in this sector may be lower than what India has officially recorded

- SANJAY KUMAR & N.K. SHARMA are, respectively, former additional director general and director general, ministry of statistics and programme implementation, Government of India.

In his Statistically Speaking column published on 19 June in Mint ('India's informal sector is being tracked better than ever before'), former chief statistician of India T.C.A. Anant, while taking on those who argue India's GDP in the current series may be overestimated, has contended—among other things—that such criticism requires a more careful analysis. His article ends on the optimistic note that better-than-ever availability of timely and regular informal-sector data presents an opportunity for India's ongoing base-revision exercise to measure value added by the informal sector in a manner that offers more clarity.

Overall, the informal (or unorganized) segment of the economy contributes 45% of the total gross value added (GVA) and accounts for 33% of the non-agriculture sector. For many sub-sectors within the non-agriculture sphere, value added for the base year is estimated as a product of GVA per worker (GVAPW) and the workforce—through what is called the 'labour-input method'. These benchmark estimates are then moved for later years as per the relevant selected indicators, like corporate growth, the volume/quantity index, sales tax and others. For 2011-12, the base year for the current series, the source of GVAPW data was the National Sample Survey 67th Round (2010-11).