Committee looking to capture informal sector activities stuck on sample

Incorporating data on the informal sector is important because GDP data gets exaggerated or understated, depending on activities in the sector
The statistics office is planning to come out with an annual survey of unincorporated enterprises that will help capture informal sector activities in the gross domestic product (GDP).

However, a panel looking into this is stuck over one crucial issue. The issue is whether the annual survey should change the sample every time as is done currently when this survey comes out after a gap of five years.

Doing it will be difficult in the annual survey because the time period will shorten. 

Incorporating data on the informal sector is important because GDP data gets exaggerated or understated, depending on activities in the sector.

For instance, former chief statistician Pronab Sen believes that GDP contraction of 23.9 per cent in the first quarter of 2020-21 was understated and the actual contraction could be in the range of 30-32 per cent. 

Even if the annual survey on these enterprises come, the informal sector’s activities would be captured in the annual GDP data and not in the quarterly data.

The quarterly GDP data would use information of the recent past and not of five years back.

On when the concept of annual survey will be ready, Sen, who heads the panel on improving official statistics, said, “Concept is there. The problem is the design. The issue is whether the survey can follow the traditional method of choosing new samples for each round.” 

“If you are going to do it annually, you don’t have the time to change the samples entirely. So, it will have to be somewhat rotating panels. Some forms are fixed. You will measure them for a certain point of time and then you would be changing them, dropping a few existing ones and incorporating new ones,” Sen said. 

The problem with unincorporated enterprises, such as hawkers and vendors, is that both their birth rates and death rates are very high. The periodic labour force survey (PLFS) has rotating panels.

“In PLFS, you can do that because households don’t change that much. But unincorporated enterprises do,” Sen added. 
When asked whether these enterprises are identifiable, Sen said they are. They are usually identified during house-listing operations. “When field investigators go to selected villages or wards, they are expected to go around and make a list of enterprises in that area and then do the random sample from that,” he said.  

Devendra Pant, chief economist at Indian Ratings, said there are institutional accounts of GDP.

“You have general government, you have public sector, you have private sector and you have household sector.

The entire informal sector comes under the household sector. This sector is the biggest among the four. The sector constituted 43.4 per cent of the gross value added (GVA) at basic prices during 2018-19.”

Based on past historical trends, ratios and proportions are used for the informal sector, Pant said. 

“It is the informal sector which has borne the brunt of the lockdown the most. We are using past trends and ratios, and after the unincorporated sector survey comes, adjustments will be made. These are the pitfalls and the ground realities,” he said. 

If the frequency of unincorporated enterprises survey is changed to one year from the current five years, there will definitely be improvement in quality of GDP data, Pant added. 

The latest survey on unincorporated enterprises came in March 2018 and it captured the data for the July 2015-June 2016 period.

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