16-Estimation of Capital Formation at State Level.pdf - Mimts.org

28 The journal of income and wealth
the estimation of change in stock is not conceptually viable or feasible at the state level due to
open boundaries of the states. Moreover the estimates of change in stock are subject to higher
fluctuations. Thus, it was felt that at the state level, GFCF would be a better indicator of capital
formation. For measurement of GFCF at state level, only expenditure approach can be adopted
as the other two methods require data on imports and exports of capital goods across the state
boundaries and net inflow of resources from outside the state, which are not available.
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Estimates of GFCF at state level are not presently compiled by the CSO because of nonavailability
of state-wise details on capital expenditures made by the two institutional sectors
namely (I) private corporate sector and (II) household sector. The only institutional sector for
which GFCF estimates are available is in respect of the public sector. Although data on GFCF
in respect of the private corporate sector at the national level are available from the Studies of
Company Finances conducted by the RBI, such details are not available at state level due to the
small sample size adopted by the RBI for these studies. Further, the blow-up factor adopted for
the national level estimates is the paid-up capital (PUC), details of which are not available at state
level. Similarly for the household sector, though data for benchmark years for pure households
are available from the AIDIS, detailed data on GFCF for the unincorporated enterprises are
not available. The benchmark enterprise surveys conducted by the CSO/NSSO also do not
give reliable estimates of GFCF at state/regional level. Hence, the major bottlenecks in the
compilation of state level GFCF refer to the private corporate sector and household sector.
However, in the recent years, CSO has taken initiatives to compile the estimates of GFCF
at state level particularly for the private sector using various sources of data. For public sector,
information is available from budget documents and annual reports of public enterprises, to a
large extent. The GFCF of supra-regional sectors like railways, communication, Banking and
Insurance, Public administration and Defence and supra-regional part of central government
administration, central departmental commercial undertakings (DCUs) and central nondepartmental
commercial undertakings (NDCUs), are prepared by the CSO and supplied to
states annually. The estimates of GFCF for the local bodies has been compiled by analysing the
budgets of a sample of local bodies.
In the case of private sector, the method that has been adopted is to distribute all India GFCF
in the private sector in respect of specific industries over the states using appropriate indicators
from various benchmark enterprise surveys conducted by the CSO and NSSO. Adopting this
approach, CSO recently compiled State wise estimates of GFCF for the year 2004-05 and the
same were discussed with the states during the regional workshops. Moving forward in this
direction, in the present paper, estimates of GFCF at state level have been prepared for the
private sector by different industry of use for the years 1999-2000 to 2005-06 using the latest
available data.
II. Approach for compilation of GFCF at the State level
The whole state economy has been grouped into specified user industries on the same lines as
done for the gross domestic product (GDP). Estimates of the GFCF at state level can then be
prepared separately for the public sector, private sector and supra-regional sectors. This is a
slight deviation from the method adopted for the national level estimates to the extent that the two
institutions sectors, namely private corporate sector and household sector are clubbed together