Tuesday, November 06, 2007

India's National Income: Camel, Pigs, Betel Leaves, Kutcha Houses and all...

I had blogged about the shifting basis of calculation of national income sometime last year. But frankly, I was ignorant about what all can go into making "India Shining" for the "Aam Aadmi"

In that context, this piece by Ashok V Desai in today's Telegraph is just too good - and surreal - not to quote from (though I would recommend that one should read the full op-ed):

"An event occurred unnoticed on January 31, 2006.... It is the change in the base year of national income estimates from the financial year 1993-94 to 1999-2000... (till) 1999-2000, our national income did not include the value of goat’s milk or camel milk, betel leaves produced in West Bengal and Assam, duck eggs, or salt made by evaporating seawater. Furthermore, it ignored the fact that like animals, trees also grow, and became more valuable as they grow.

Gold and jewellery have been amongst our prize possessions for millennia; but it was only in 1999-2000 that their purchases were included... a special new rubric was created for them; they will be found under capital formation...

If an enterprise made a loss, I would have thought that this was negative value added and should be subtracted from national income. But then,... the CSO now treats all losses of public enterprises as imputed subsidies. Would it equally treat losses of private companies as subsidies? I doubt it...

We have developed a large industry to make software. It is of such recent origin that it was ignored in previous compilations. But by 1999-2000 its output was significant, and it had to be taken into account. Is software a consumer good or an investment good?... After due deliberation, the CSO classified it as investment... The CSO’s practice of treating all software as equipment leads to an overestimate of national income; but the alternative is perhaps too complex for a government organization.

...Foreign companies have subsidiaries in India. If they save their profits and reinvest them in the business, that increases the value of the business and adds to the foreign companies’ assets — which are, so to say, India’s liabilities to foreign investors. Those reinvested profits somehow went unnoticed all these years; now they are included in foreign inward investment.

...On the insistence of the Assam DES, the CSO included Rs 13.55 billion’s worth of betel leaves. The Andhra DES insisted on the inclusion of toddy, but had no clue about its value. So the CSO studied consumption data from the National Sample Survey and came to the figure of Rs 5.44 billion...

...The Socio-economic Research Centre had said that a camel gave 700 grams of hair a year if it had one hump, and 3 kilograms if it had two... However, the NRCC (National Research Centre on Camel in Bikaner) disowned these figures, and said that a single-humped camel gave 800 grams of hair. Just why a double-humped camel gives almost four times as much hair as one with a single hump is not known; but then, the NRCC is the expert on camels, and must be trusted. There is no National Research Centre on Pigs... So the CSO went to the Bhongaon Pig Fair in Mainpuri district and gave a haircut to a number of pigs. The average pig yielded 155 grams. Camels and pigs together accounted for Rs 180 million of hair.

... kutcha houses; the resources that go into their construction should be included in investment. This category has turned out to be very convenient for the CSO. It found that as tea shrubs, coffee creepers and rubber trees grew, they became more valuable. Not knowing where to put this value added, the CSO classified it as kutcha construction. This habit of treating trees as kutcha houses became an addiction; the CSO went on to define as kutcha value added by growing plants of seven kinds — mango, grape, coconut, arecanut, cashewnut, sapota, and citrus fruit. Then recently it found that many tall, sophisticated windmills had gone up in the country. Not knowing what to do with them, the CSO classified them too as kutcha houses...

Even after including everything possible in kutcha houses, a number of services remained. These include sewage and refuse disposal, social work, unorganized hairdressing and beauty treatment, and funeral services. One could question whether the output of extraterritorial organizations such as embassies is a part of a country’s income at all. The CSO thinks it is; they too are dumped into other services together with rubbish dumps and cemeteries.

If an animal gives milk, is hitched to a cart or plough or gives babies, it is treated as a capital asset. The change in the number of animals is termed investment, and the capital stock is depreciated. But pigs and chicken are not considered durable assets; change in their numbers is treated as a change in stocks, not as investment."

Desai concludes:

"...While the CSO has included the value of camels’ hair and pigs’ bristles, I am not sure it has included the value of the services of the artists who cut their hair. That exclusion leaves the figures for beauty treatment severely underestimated...."



Supratim said...

As, they say, there are lies, damn lies and statistics ......... : )

Waiting for them to add "gobar" to the national GDP, if it is already not there. After all, it is both fuel and construction material.


annie said...

hilarious! thanks for this post.

Ashok Desai said...

Thank you, Madhukar, for noticing my article. All the humour was incidental; estimation of national income is a serious business, and for all the fun I made of it, I think the Central Statistical Organization does it very conscientiously. The figures are neither lies nor damn lies; they are as close as one can get to an elusive truth. And gobar (cowdung) is a part of national income, which consists of final goods and services which are either consumed or added to stocks, only if it burnt by households in their kitchens; in that case it is a part of their fuel consumption. If it is used as manure, it is an input into the production of crops, and its value is embodied in the value of the crops. If it were then reckoned into national income, that would be double counting.

Madhukar said...

Honoured by your visit to my blog and comment, Mr Desai!

I completely agree with you about the sincerity of the CSOs efforts - and that the parameters for value creation (adding to the National Income) do need to keep on getting updated.

Why I admired your article - and quoted it - was because the way these figures are misused and promoted by the incumbent govts to further their agenda (without informing that the base-line has been changed)

I also know that not only in India, but even other governments are trying to revise the way they calculate their national income - e.g., US Govt proposed to include the voluntary work done by their citizens -

... the issue which I wanted yo highlight - and which your article brought forth so clear - that the govts try to leverage these numbers... without clarifying that the base has changed.