User Manual on Quarterly Gross State Domestic Product ( Data Sources and Methods: A S t e p b y Step Process with Illustrations 2017 Directorate of Economics and Statistics, Odisha, Bhubaneswar Officers and Staff Involved Sri Benudhar Jena, Joint Director Md. Feroz Khan, Deputy Director Sri Rajballav Kar, Assistant Director Sri Ashok Kumar Pattanaik, Statistical Officer Sri Dhruba Charan Kar, Statistical Officer Smt. Smruti Ranjita Pattanaik, Assistant Statistical Officer Sri Ramesh Chandra Mallick, Assistant Statistical Officer Sri Pravat Ranjan Samantaray, Assistant Statistical Officer Sri Sarat Chandra Sahoo, Assistant Statistical Officer (Computer) Foreword . It gives me immense pleasure to say that for the first time the DES took steps to document the sources and methodology used in estimation of Quarterly GSDP. The training- cum-workshop held on 11th and 12thApril, 2016 at Bhubaneswar under the technical guidance of National Accounts Division (NAD), Central Statistics Office (CSO), Government of India paved the way for its documentation. Ms T. Rajeswari, Deputy Director General, NAD participated in the training programme and gave detail sector wise methodology for estimation of Quarterly GSDP. Thereafter, the State Income Division went ahead with preparation of the “User Manual on the Quarterly GSDP” with step-by-step process along with illustrations. I hope, this user manual will not only help in sharing the methodology for preparation of Quarterly GSDP among the staff of State Income Division but also bring wide dissemination among the officers of DES, and other users of State Income Statistics. Suggestions are invited for further improvement in the methodology. I thank the officers and staff of State Income Division for bringing out this booklet for future reference and guidance. (Dushasan Behera) DIRECTOR Abbreviation BE Budget Estimate CCI Cost of Construction Index CPI Consumer Price Index CSO Central Statistics Office DCU Departmental Commercial Undertaking GFCF Gross Fixed Capital Formation GSDP Gross State Domestic Product GVA Gross Value Added GVAPW Gross Value Added per worker GVO Gross Value Output IIP Index of Industrial Production IOD Index of Dwelling IPD Implicit Price Deflator MCA Ministry of Corporate Affairs MOSPI Ministry of Statistics and Programme Implementation NAD National Accounts Division NDCU Non Departmental Commercial Undertaking NSS National Sample Survey OFDC Odisha Forest Development Corporation RRB Rural Residential Building SNA System of National Accounts URB Urban Residential Building WPI Wholesale Price Index User Manual on Quarterly GSDP Contents Page No Chapter-1 1 Concepts and Definitions 1 Chapter-2 12 Gross Domestic Product – An Overview 12 Chapter-3 15 Estimates of Quarterly GSDP (QGSDP) 15 Introduction 15 Sectors and Methodology 16 Agriculture 16 Livestock 18 Forestry 19 Fishery 20 Mining and Quarrying 21 Manufacturing 22 Electricity, Gas, Water Supply & other utility services 23 Electricity 24 Construction 24 Trade, Hotel & Restaurant 25 Transport, Storage & Communication 27 Financial Services (Banking and Insurance) 29 Real estate, Ownership of dwelling and Business services 30 Public Administration 31 Other Services 32 Methodology for Compiling Taxes and Subsidies 33 Ilustration of estimation of QGSVA & QGSVO of Crops (Appendix-I) 34 Indicators used for Quarterly Estimates of GSDP (Appendix-II) 35 Crop Calendar (Appendix-III) 36 User Manual on Quarterly GSDP Chapter-1 Concepts and Definitions Basic Variables of National Accounts For an economy, the total supply of goods and services must equal the total uses. Thus: (1.1) Total supply of goods and services = Total uses of goods and services In an open economy engaging in foreign trade, the total supply of goods and services consists of domestically produced output and imports. The uses consist of intermediate consumption, final consumption, gross capital formation and exports. Intermediate consumption consists of the goods and services consumed in the production process (excluding the consumption of fixed assets), while final consumption consists of the goods and services provided to the benefit of final consumers. Thus: (1.2) Output + imports = Intermediate consumption + final consumption + gross capital formation + exports A re-arrangement of equation (1.2) allows for the identification of gross value added as output minus intermediate consumption. Leaving the issue of taxes and subsidies on goods and services aside, gross value added is the value of all goods and services produced during a production period but not immediately used up in the production process of that period. Hence, gross value added represents the value of all goods and services which are available for the different uses other than intermediate consumption. Thus: (1.3) Gross value added = output – intermediate consumption (1.4) Output – intermediate consumption = final consumption + gross capital formation + exports – imports State Income Division, D.E.& S, Odisha 1 User Manual on Quarterly GSDP The items intermediate consumption, final consumption and gross fixed capital formation on the uses (right) side of equation (1.2) are measured from the perspective of the consumer or purchaser. Their values take into account the taxes and subsidies on goods and services. Yet output is measured from the perspective of producers in terms of the receipts receivable by them, leaving all of the taxes on goods and services aside while including subsidies on goods and services. Therefore, taxes on goods and services have to be added to output and subsidies subtracted from output in order to arrive at a uniform valuation of supply and uses. (1.5) output + taxes – subsidies – intermediate consumption = final consumption + gross capital formation + exports – imports On the left side of equation (1.5), we find the value of all goods and services produced in a period minus the goods and services consumed in the production process during that period, which is called gross domestic product (GDP). GDP can be measured by having the values for output and intermediate consumption aggregated across the various industries of an economy: GDP by production approach. Thus: (1.6) GDP = output + taxes – subsidies – intermediate consumption. (1.7) GDP = gross value added + taxes – subsidies Looking at the right side of equation (1.5), gross domestic product can also be viewed as the value of all goods and services available for different domestic final uses or for exports: GDP by expenditure approach. Thus: (1.8) GDP = final consumption + gross capital formation + exports – imports The production process creates incomes for not only the owners of the inputs used in production but also for owners of capital and for the government. The value of those incomes is equal to gross domestic product. Hence, GDP can also be calculated as the sum of compensation of employees, taxes less subsidies and gross operating surplus/mixed income: GDP by income approach. Thus: (1.9) GDP = compensation of employees + taxes - subsidies + gross operating surplus / mixed income State Income Division, D.E.& S, Odisha 2 User Manual on Quarterly GSDP Gross national income As an aggregate measure of production, gross domestic product refers to production of all resident units within the borders of a country, which is not exactly the same as the production of all productive activities of residents. Some of the productive activities of residents may take place abroad (for example temporary and seasonal labour working abroad). Conversely, some production taking place within a country may be attributed to temporary and seasonal foreign labour. The contribution of labour is accounted for through the compensation of employees paid to non-residents and received by the economy. In addition, some primary income generated within the country may go to non-resident units (for example, interest paid to providers of loans from abroad or dividends paid to non-resident owners of shares). Symmetrically, some primary incomes generated in the rest of the world may go to resident units. Thus, the concept of gross national income seeks to measure the net income due to their ownership of factors of production (labour, net non-produced assets and capital) received by residents in a country. Residents are defined based on their centre of economic interest. Hence, gross national income (GNI) is defined as follows: (1.10) GNI = GDP + compensation of employees and property income from the rest of the world – compensation of employees and property income to the rest of the world All GNI is not available for final uses domestically since some of it is transferred to other countries without anything being received in exchange, such as money sent to support dependants living in another country. Such transfers are called current transfers, and taking them into account leads to the following concept of gross national disposable income: (1.11) Gross national disposable income = GNI + current transfers from the rest of the world – current transfers to the rest of the world Gross national disposable income is the income available for consumption and saving. Thus: (1.12) gross national disposable income = final consumption expenditure + gross saving State Income Division, D.E.& S, Odisha 3 User Manual on Quarterly GSDP Gross saving, gross capital formation and net lending Gross saving is the difference between gross national disposable income and final consumption. Gross saving together with net capital transfers (capital transfers receivable less