7.3 Assessing the Quality of Survey Estimates

Current Status

7.3.1 The main sources of data in the Services Sector are (a) the Follow-up Enterprise Surveys of Economic Census conducted by the MoS&PI, (b) Department of Company Affairs (DCA), and (c) Reserve Bank of India (RBI). So far as data pertaining to the Corporate Sector are concerned, the DCA and Registrars of Companies are not processing and disseminating the information contained in the annual reports or balance sheets at present. As a result, the estimates of capital formation and valued added for the Corporate Sector are at present based on the company finance studies of the RBI which also suffer from an inadequacy of the sampling frame and limitation of sample size.
7.3.2 The Expert Group on Savings and Capital Formation under the Chairmanship of Dr. Raja J. Chelliah examined the estimates of the Corporate Sector. The Group submitted the report in December 1996. While recognising the weaknesses of the sampling procedure, the Group recommended that the present database of the DCA should be sufficiently broadened so that the reliability of the estimates obtained from the RBI studies is improved substantially. The Commission has studied the deficiencies of the Corporate Sector Statistics in great detail and made a number of wide-ranging recommendations for improvement of the database.
7.3.3 As regards the Follow-up Enterprise Surveys (FuS) of the Economic Census (EC) on the Services Sector, so far twelve such surveys have been conducted (see Annexe 7.3) after the EC was introduced in 1977. In the FuS, a stratified sampling design with villages and urban blocks as the first-stage units and enterprises as the ultimate-stage sampling units is adopted. For selection of the villages and urban blocks, generally the village and urban block-level data of the number of enterprises or workers as per the EC are used as the sampling frame subject to their availability or usability. The FuS provide detailed information on the estimated number of enterprises, workers, fixed assets, working capital, gross value added, etc. for various activities covered in the survey. Apart from the FuS, information on the number of enterprises is also available from the EC and the data of number of workers are available from three more sources namely, the EC, Population Census and Employment-Unemployment Surveys (EUS) of the NSSO.
7.3.4 Normally, a wide divergence between the numbers of enterprises as per the EC and FuS is observed, with EC figures being much lower than the FuS estimates. A similar trend is also observed in the estimates of number of workers as per the two sources. This is despite the fact that the FuS do not take into account the public sector enterprises while the EC does so. A wide divergence in the figures of number of workers as per the FuS, Population Census and EUS is also observed.
7.3.5 The Expert Committee to examine wide variations in data sets on the same subjects (Report submitted in February 2000) examined in great detail the said alternative data sets of the number of enterprises and workers as per the Third EC (1990), FuS conducted around the year 1990 for different activities, Population Census (1991) and EUS (1993-94). A comparative picture of the estimated number of enterprises and workers as per the alternative sources as included in the Report of the Expert Committee is presented in Annexes 7.4, 7.5, 7.6, 7.7, 7.8 and 7.9. The all-India figures as per the alternative sources are quoted in Box 7.2. It may be seen that there are wide divergences in the alternative data sets. The divergence is very pronounced for the transport activity.

7.3.6 The EC and the FuS define an enterprise in exactly the same manner. Hence the numbers of enterprises as per these two sources should ideally be in fair agreement. Studies carried out in the past revealed that the divergences in the number of enterprises as per the two sources are mainly due to an under-listing of enterprises by the enumerators in the EC.

Estimated Number of Enterprises and Workers as per the Alternative Sources for Selected Activities: All-India
(a) Number of enterprises (in lakh)
Activity			EC’90	FuS
Trading			88.51	118.20
Hotels & Restaurants			10.78	16.84
Transport			5.03	10.34
(b) Number of workers (in lakh)
Activity	EC’90	’91 Census	FuS	EUS’93-94
Trading	150.30	215.90	192.11	229.91
Hotels & Restaurants	27.69	*	35.55	31.72
Transport	13.36	*	15.79	90.41

7.3.7 As regards the number of workers, the estimate as per the EC is expected to be low because of under-listing of enterprises in the EC as stated above. Another reason for divergences could be the differences in the definition of workers and in the reference period for determining the number of workers as per the alternative sources (see paragraph 5.2.17 of chapter 5 on Industrial Statistics). Divergences in the estimates of number of workers as per the FuS and EUS could partially also be due to the difference in the approaches of the two sources in counting workers. While the former counts the workers by visiting the enterprises, the latter does so by visiting the households. To what extent the observed divergences are explainable due to the differences in the concepts and definitions as stated above needs to be assessed.
7.3.8 In the opinion of the data users the estimates of gross value added (GVA) per worker based on the FuS are sometimes unrealistic and, in fact, they are alleged to be underestimated. Much of the reported data may be based on the accounts, which may be inaccurate. The Commission has observed that there is no regular mechanism to address this grievance by cross validating the estimate of GVA per worker with the estimates of other correlated socio-economic variables available through different surveys or censuses. For example, in the survey on trade, one could explore the possibilities to derive estimate of sales by applying the data on trade margin over the purchase data and accordingly obtain an alternative estimate of GVA per worker based on this derived sale data. Similarly, efforts could be made to evolve a suitable method of data collection for improving the estimate of GVA per worker in respect of certain categories of service providers say, doctors, medical specialists, advocates, etc. The Commission has further observed that the survey reports do not generally discuss the quality of the FuS estimates.

Conclusions and Recommendations
7.3.9 After reviewing the deficiencies, the Commission recommends that:
- A unit in the proposed National Sample Survey Office of the National Statistical Organisation should be set up to regularly undertake studies for bringing about improvement in the survey methodologies, including method of data collection, and also suggest measures for minimising non-sampling errors in the surveys. The National Sample Survey Office should publish standard errors of important estimates in the survey reports. These recommendations on the improvement of data quality and release of standard errors of estimates are relevant for surveys pertaining to numerous areas including the Services Sector.
Deficiencies
- 7.2.6As stated already, NIC-98 is based on the ISIC (Revision 3), which was brought out a decade ago. But newer and newer types of services are coming into existences that have a parallel in other countries. Clearly, there is an urgent need to have an inventory of the emerging service areas and have a detailed classification of these. It may be desirable to have a classification of services in India such that it is comparable with other countries. In this context, the World Trade Organisation’s (WTO’s) List of Services (see Annexe 7.2) sheds important light on the various service areas that have been recognised. While it is likely that the importance of many service areas may differ from country to country, it will be noticed from this List that none of the areas seem irrelevant for the Indian context. It is possible that the level of operation of some of these services may be very low at present in the Indian context, but with progressive development they will tend to change. With increasing communications and free flow of information, it is very likely that services, which seem unimportant today, could acquire significance in the near future. At any rate, the objective to study the WTO’s list is to merely provide an indicative list of services. In the WTO’s List of Services presented in Annexe 7.2, an indication is given as to whether the various services listed are provided with specific Codes in the NIC-98 or not. A comparison of the two lists reveals the following:
  - Number of sub-categories or activities in the WTO’s list – 155;
  - Those listed as ‘others’ in the WTO’s list – 17;
  - Remaining sub-categories with proper description of activities – 138.
  - Out of (c):
    - Number of activities not listed in the NIC – 35;
    - Number of activities that are clubbed with other activities in the NIC –25;
    - Number of activities where the NIC either gives specific codes to the activities or splits the activity in the WTO’s list into more than one activities – 78.
Conclusions and Recommendations
- 7.2.7 It may be seen that there are cases where NIC-98 gives a more elaborate classification than the WTO list. But in many cases, NIC-98 has scope for further detailing. Thus there is a need for developing a proper Classification of Services. For the purpose of developing the suggested Classification, it is necessary to identify first the variety of services already in existence in India by considering all available sources. The task would involve identification of new activities by:
  - Looking at the international documents, websites and list of service providers that have made their appearance in the plethora of Yellow Pages of numerous cities and towns across India or in telephone directories;
  - Interacting with various agencies or associations that will be in a position to throw light on emerging areas or new activities; and
  - Examining alternative data sets like those of Follow-up Enterprise Surveys, Annual Survey of Industries as well as production data available from other sources.
- 7.2.8 Once the new but important activities are identified, the next task would be to classify them appropriately for meeting the requirements of the users. It may be mentioned that at the international level, including WTO, UN systems, IMF and World Bank, an effort is being initiated for properly coding commercial trading in Services, which has been already classified into 12 categories and 155 sub-categories in the WTO’s list.
- 7.2.9 It may also be mentioned that ISIC (Revision 3) took place during the year 1990. But the National Industrial Classification (NIC-98) was developed in 1998, i.e. after a gap of eight years. For maintaining international comparability, there is a need to reduce such gaps in future. In other words, when the next revision of the ISIC takes place, the CSO may immediately consider revising the existing National Industrial Classification. Of course, in the event of no such revision taking place at the international level in near future in the industrial classification, India has yet a case for revising the NIC-98 by properly classifying all important activities that have already assumed significance in the country’s economy, or are likely to do so in near future.
- 7.2.10 The Commission accordingly recommends that:
  - The work of identification and the preparation of a list of new activities in the Services Sector that are coming into existence should be carried out on a regular basis.
  - All such activities should be assigned proper codes within the framework of NIC and International Classification, periodically by the CSO for the benefit of user organisations with a view to maintaining international comparability.
  - The suggested list of new activities with their codes should be released through the website as well as other media.
  - Of these new activities, those, which are important at the international level, should be taken up with the organisations like WTO, IMF, etc. for their proper representation in the international classification.
  - Periodic revision of NIC should be attempted within a reasonable time frame after revision of the classification takes place in the international scenario.
  - The CSO should monitor the work stated above.

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