ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Why Has It Shrunk?

Unorganised Sector Output in the New GDP Series

In the new National AccountsStatistics, household (unorganised or informal) sector output for 2011-12 has shrunk by 22% in absolute size, or, by 11 percentage points of GDP, compared to the older series with 2004-05 as the base year. In per capita terms, household sector output as a proportion of GDP in the organised sector has come down from 11% to 7%. A change in the methodology of estimation has been the cause. This article investigates the merits of the new methodology.

In the new series of National Accounts Statistics (NAS), for 2011–12, the absolute size of the household sector’s (HH) (unorganised or informal sector) gross value added (GVA, or the gross domestic product (GDP), or output for short) is smaller by 22%, compared to the older series with 2004–05 base year.1 As a share of GDP, the HH sector, by size, has contracted by 11 percentage points, to 45% in the new series (Figure 1, p 25). It is the mirror image of the rise in the private corporate sector’s (PCS) share in GDP in the new series, with the public sector’s share remaining unchanged. These changes hold true for 2012–13 as well.

In terms of per capita GDP, the shrinkage of the HH sector size is starker: it is now reduced to just 7% of per capita income of the organised sector for 2011–12, down from 11% previously—signifying even greater income inequality across the two sectors than what was estimated earlier (Figure 2, p 25). Hence, the new figures have serious implications for understanding of the economic structure and its interrelationships.

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