Estimates of Unreported Economy in India-A Reply

Estimates of Unreported Economy in India Poonam Gupta Sanjeev Gupta WE had in our paper [Gupta and Gupta, (1982)] presented estimates of the unofficial economy in India on a yearly basis for the period 1967 to 1978. For this purpose, we employed a technique suggested by Feigc [1979], that has been used to determine the size of the unreported economy in many developed countries including USA and Canada. The results had shown that the unreported activity as a proportion of official GNP has grown from 9.5 per cent in 1967 to nearly 49 per cent by 1978. In his comment, Sandesara [1982] argues that our estimates are on the high side. The purpose of this reply is to show that the theoretical basis of Sandesara's criticism is weak and his methodology inappropriate. Further, his analysis indicates a lack of understanding of the functioning of the unofficial economy. In the next section, we briefly summarise Sande- sara's analysis mainly to highlight its shortcomings. The last section gives the estimates of total economic activity (consisting of both official and unofficial) in India prepared by other researchers which point to the . fact that our estimates of unofficial economy are by no means over estimates.