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  • 13.6 Saving And Capital Formation

13.6 Saving and Capital Formation

  • Brief Method of Compiling Estimates of Saving and Capital Formation
    • 13.6.1 The methodology of compiling the estimates of saving and capital formation in India has been examined by two Expert Committees: the K.N. Raj Committee, “Capital Formation and Saving in India 1950-51 to 1979-80”, (Report published in February 1982) and the Raja J. Chelliah Committee “Report of the Expert Group on Saving and Capital Formation”, December 1996, respectively. The estimates of capital formation are prepared separately by three methods, i.e from the financing side as the sum of saving and net capital inflow from abroad, by assets and by industry of use (sum of gross fixed capital formation (GFCF) and change in stocks). Of the three independently derived estimates of domestic capital formation, the estimate derived from the financing side namely, sum of domestic saving and net capital inflow is judged to be firmer than the estimates of domestic capital formation by assets and institutions and is, therefore, taken to be the control total for domestic capital formation. The difference between the control total and domestic capital formation by assets and by institutions are shown as errors and omissions. Domestic household saving in the form of physical assets appear as a component of domestic saving and domestic capital formation and on which no direct estimate is available from year to year. Consequently, domestic household saving in the form of physical assets, in effect, turns out to be the residual adjusting variable for ensuring identity between the three independently derived estimates of domestic capital formation. Both the Raj Committee and Chelliah Committee were uncomfortable with household saving in the form of physical assets being arrived at as a residual but did not suggest any alternative method.
    • 13.6.2 Raj Committee (set up in 1981) on the method of estimation of Saving and investment, specified the role of the RBI and the CSO in preparing the estimates on saving and investment. While the RBI was recommended to prepare the estimates for the private corporate business sector and on financial saving (except life insurance, provident and pension funds) of household sector, the estimates for the rest of the institutional sectors and components as well as total domestic saving were to be compiled by the CSO.
    • Saving
      • 13.6.3 Saving represents the excess of current income over current expenditure of various sectors of the economy. It is the balancing item on the income and outlay accounts of the producing enterprises, households, Government administration and other final consumers. Estimates of domestic saving are prepared at current prices only by type of institutions i.e., public sector, private corporate sector and household sector (residual), separately.
      • 13.6.4 In respect of public sector the data available in the Government budget documents and annual reports of the enterprises are analysed in detail. The estimates of saving are derived from the income and outlay accounts in respect of administrative departments and departmental and non-departmental enterprises separately.
      • 13.6.5 Estimates in respect of the private corporate sector are based on an analysis of the annual accounts of sample companies duly adjusted for full coverage on the basis of data on paid up capital of all companies. The estimates in respect of co-operative societies are worked out from the data supplied by the NABARD.
      • 13.6.6 The estimates of financial saving in respect of households including non-profit institutions and unincorporated private business are estimated by changes in the net financial assets held by them such as: currency, deposits with financial institutions, shares and debentures, claims on Government, net equity in the life funds, provident and pension funds net of changes in financial liabilities. The estimates in respect of various financial instruments are arrived at as a residual after duly accounting for such instruments held by public and private corporate sectors. In estimating the financial saving of the households, increments in their holdings of financial assets are calculated net of increments in their financial liabilities. These annual flows are compiled instrument-wise. As the household sector is an unorganised sector and its balance sheets are not available, its financial flows are either estimated on the basis of firm information obtained from the accounts of counterpart institutions engaged in transactions with the households or as a residual after deducting the accounted financial information for the other sectors from the financial totals or are based on the information collected on sectoral distribution either directly or on the basis of surveys. In the case of households, saving in the form of physical assets for own use as accounted for under capital formation estimates are also added. This means that the capital formation estimates of the household are taken as saving in physical assets of the households.
    • Capital Formation
      • 13.6.7 Gross capital formation (GCF) refers to the aggregate of gross additions to fixed assets (i.e., fixed capital formation) and change in stocks during the counting period. Fixed assets comprise construction and machinery and equipment (including transport equipment and breeding stock, draught animals, dairy cattle and the like). Construction for military purposes (other than construction or alteration of family dwellings for military personnel) defence equipment, increase in the stocks of defense materials and durable goods in the hands of the households are excluded from the scope of capital formation. However, capital outlays of defence enterprises on ordnance and clothing factories are included. The estimates of capital formation for the entire economy, by assets, are based on a commodity flow approach except the part of kutcha construction works. Estimates are based on current data in respect of outlays on new construction works, purchase of machinery and equipment and net addition to inventories. Data on expenditure on kutcha construction works are available from various budget documents in respect of public sector and the reports of various plantation boards. In the case of the household sector, estimates of the output of kutcha construction are based on AIDIS as discussed under the GVA of the construction sector. The estimates of inventories and change in stocks are made by industry of use. Whereas the public and private corporate sector's estimates are made on the basis of analysis of budget documents and annual reports of DCUs/NDCUs, and the RBI's study of company finances, those of the household sector are made initially for the benchmark year and for the subsequent years, through appropriate indicators. For the agriculture sector (which includes livestock), the change in stocks in the household sector are the increment in livestock of certain categories of animals, which are available every year. There are no change in stocks for the forestry, fishing, construction, electricity, gas, and water supply sectors, railways, banking and insurance, communication, real estate, ownership of dwellings and business services, other services and public administration and defence in the household sector. For the mining sector, the household sector's inventories are based on the results of the enterprise survey on minor minerals. For subsequent years, they are made through extrapolation with value of output of minor minerals. For the registered manufacturing sector, the estimates of inventories of household sector are those held by individual proprietorship, joint family and partnership firms, data on which are available from the ASI. For the unregistered manufacturing sector, the benchmark estimates are made using Enterprise Survey results and for subsequent years, by extrapolating with GDP of unregistered manufacturing sector. For trade, hotels and restaurants and other transport and storage sectors, the household inventories are based on Enterprise Survey results for the benchmark year. Estimates for the subsequent years are based on bank advances in the case of trade, growth in number of enterprises in the case of hotels and restaurants and growth in GDP in the case of other transport and storage sectors.
      • 13.6.8 The estimates of capital formation for the public sector are based on the analysis of budget documents and annual reports of Department/Non-Department Commercial Undertakings (DCUs/NDCUs). In the case of the private corporate sector, the estimates are prepared on the basis of the results of sample companies published by RBI, duly adjusted by the data on paid up capital for all companies for full coverage. Making use of almost the same sources of data, estimates are also prepared by industry of use. However, because of dissaggregation of data by various industrial sectors the estimates by industry by use as well as by type of assets and institutions generally do not tally. The estimates at constant (1993-94) prices are worked out with the help of suitable price indices as applicable by various assets, institutions as well as industry groups separately.
      • 13.6.9 For the purpose of compiling the various rates of capital formation, the aggregate arrived at as the sum of saving and net capital inflow is taken to be the firmer estimate of capital formation than that by assets and industry of use. The difference between this estimate and the estimate of capital formation arrived at by the commodity flow method, by assets is shown as ‘errors and omissions’. The following table shows the extent of difference between the three estimates of capital formation, for the year 1993-94.
      • Table 13.11: Estimates of Capital Formation for the year 1993-94
        Items

        Capital formation, 1993-94

        Capital formation  as sum of saving and net capital inflow

        1,98,412

        Capital formation by type of assets and by institutions

        1,82,619

        Capital formation by industry of use

        1,81,133
    • Existing data sources
      • 13.6.10 The sources of data for saving in respect of public sector are the same as those used for estimating the GDP and other aggregates for this sector. For the private corporate sector and for the household saving in financial assets (except life insurance, provident and pension funds), the source agency is the RBI. The NABARD supplies information in respect of cooperative societies. For the saving in financial assets (insurance, provident and pension funds), the sources of data are the Life Insurance Corporation of India, Provident Fund Organisation and the budget documents. For the saving of households in physical assets, a residual method of estimation is used i.e. total domestic capital formation minus capital formation by public and private corporate sector.
      • 13.6.11 The sources of data for the GFCF (by type of assets), in respect of construction are the same as those used for the GDP estimates. For machinery and equipment, the sources of data are the Annual Survey of Industries and the 5-yearly surveys conducted by the NSSO on unorganised manufacturing. The sources of data for the public, private corporate and cooperative societies are the budget documents/annual reports of administrative departments, departmental commercial undertakings and non-departmental commercial undertakings, the RBI and the NABARD, respectively. The estimates of household GFCF are derived by the residual method.
      • 13.6.12 The sources of data for the GFCF by industry of use for the public, private co-operate sector and cooperative societies are the same as those mentioned earlier. For the household sector, the sources of data are the AIDIS and the enterprise surveys conducted from time to time.
      • 13.6.13 The sources of data and the method of estimation are summarised below in a tabular form:
        Sl. No.   Source of data   Method of estimation and its share in 1993-94  
        (a) Gross Domestic Saving  

        Household Sector

         

        Total of Financial Saving and Saving in the form of Physical Assets. 

        The household sector accounts for 81.8 % of gross domestic saving of the country

        Financial Saving     

        Currency

        Net Deposits

        Shares and debentures

        Net Claims on Government

        Provident and Pension Fund

        Insurance Fund     

        RBI

        Provident Fund Organisations

        LIC

        Budget documents

         

        Residual methods i.e. Total minus that for Public Sector and Private Corporate Sector except for P.F. and Pension fund and Life funds.

         

        P.F and Pension Fund  =Contribution  - Withdrawals  + Interest.  

         

        Life Fund   =Income - Expenditure.

         

        The financial saving of the household sector accounts for 48.9 % of gross  domestic saving of the country.

        Saving in the form of physical  Assets

        Household Capital Formation

        Household investment in fixed assets is derived as residual deducting the corresponding estimates of public and private corporate sector from the total capital formation by assets plus change in stock.

         

        The saving in physical assets of household sector accounts for 32.8 % of gross domestic saving of the country

        Private corporate  sector

        RBI

        Total of joint stock companies and co-operative bank and societies.

         

        The private corporate sector accounts for 15.4 % of total  gross domestic saving of the country

        Companies

        RBI

        Retained profit plus depreciation provision.  These account for 14.7 % of total gross domestic saving of the country.

        Co-op banks and  societies

        NABARD

         

        Gross saving is equal to sum of statutory reserve and other reserves.  These account for 0.7 % of the total gross domestic saving of the country.

        Public  Sector

         

        Total of public authorities and non-departmental enterprises.

         

        The public sector accounts for 2.8 % of total gross domestic saving saving of the country.

        Public  authorities

        Budget Documents

        Total of Government administration and departmental commercial enterprises (have negative saving in 1993-94).

        Government Administration 

         Budget Documents

        Current receipt minus current expenditure (have negative saving in 1993-94).

        DCUs

        Budget Documents 

        Current receipt minus current expenditure. 

        These account for 3.8 % of total gross domestic saving of the country.

        NDCUs

        Annual  Reports

        Gross Saving is equal to Net transfer to balance sheet + transfer to reserve adjusted for expenditure net of income relating to previous year + Depreciation. 

        These account for 12.4 % of total gross domestic saving of the country,

        Net Capital  Inflow from abroad

        RBI

        Net capital inflow is the deficit of the nation on current account in balance of payment account excluding official transfer payment. 

        This component accounts for 2.4 % of gross capital formation.

         Aggregate Gross Domestic  Capital

        Formation  

         

         Aggregates Gross Domestic Saving plus net Capital Inflow from abroad

         

         (b) GROSS FIXED CAPITAL FORMATION (GFCF) BY  TYPE OF ASSETS

        Construction

        Four basic materials namely, Cement and Cement Products, Iron and Steel, Bricks and Tiles and Timber and Roundwood plus  other materials

        Through commodity flow approach for accounted construction using basic materials, other materials and factor payments and expenditure approach for unaccounted construction.

        Construction accounts for 47.5 % of GFCF of the country

        Public sector

        Budget documents for admn. departments

        Annual reports for others

        New capital outlay on construction as obtained from the analysis of Budget documents and annual reports.

        This accounts for 19.8 % of GFCF of the country and 41.7 % of total construction.

        Private corporate

         sector

        RBI, NABARD and Tea, Coffee and Rubber Boards

        Same method as worked out for the construction sector

        This accounts for 4.0 % of GFCF of the country and 8.4 % of total construction.

        Household sector

        Residual Method and All-India Debt and Investment Survey (AIDIS) 1991-92.

        Total Value of Construction less Value of Output in Public Sector and Private Corporate Sector is the value of output in household sector, less repairs and maintenance of households plus new outlays in rural and urban residential and non-residential buildings and other construction works (covered through AIDIS).

        This accounts for 23.7 % of GFCF of the country and 49.9 % of total construction.

        Machinery and transport equipment

         

        ASI for organised sector

        DGCI&S for foreign trade

        Receipt Budget for duties

        NSSO for unorg. Sector

        Software Cos. Reports

        Sum of total Ex-factory value of capital goods + Import + Import duty + Re-Export + TTM  - Exports + Fixed Assets in livestock + GFCF in Computer Software.

        Machinery and equipment accounts for 52.5 % of GFCF of the country.

        Public sector

        Budget documents and Annual reports of DCUs and NDCUs

        Capital outlay and repair and maintenance as obtained from the analysis of Budget documents and Annual reports.

        This accounts for 17.5 % of GFCF of the country and 33.4 % of total machinery and equipment.

        Private corporate

         sector

        RBI for corporate sector

        NABARD for co-ops.

        Based on data from RBI and NABARD.

        This accounts for 23.9 % of GFCF of the country and 45.5 % of total machinery and equipment.

        Household sector

         

        Derived as a residual from the total

        This accounts for 11.0 % of GFCF of the country and 21.1 % of total machinery and equipment.

        (c) GROSS FIXED CAPITAL FORMATION (GFCF) BY  INDUSTRY OF USE

        Agriculture

        Public sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        Agriculture sector accounts for 7.1 % of GFCF.

        Private Corporate Sector

        RBI

        GFCF of sample joint stock companies are blown up on the basis of paid up capital.

        Household sector

        Construction

        Machinery

         

        AIDIS 91-92

         

         

        Base year estimates (based on AIDIS) are moved with output of agriculture and increment in livestock.

        Base year estimates (based on AIDIS) are moved with ASI data.

        Forestry and logging

        Public sector

        Budget documents and Annual reports

         

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and Annual reports

        Forestry sector accounts for 0.3 % of GFCF.

        Private corporate sector

        RBI

        GFCF of sample joint stock companies are blown up on the basis of paid up capital.

        Household sector

         

        Public Sector estimates inflated by 5.4 %

        Fishing

        public sector

        Budget documents and Annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports

        Fishing sector accounts for 0.7 % of GFCF.

        Private corporate sector

        RBI

        GFCF of sample joint stock companies are blown up on the basis of paid up capital.

        Household sector

        Livestock Census

        GFCF estimated directly

        Mining and quarrying

        public sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports

        Mining sector accounts for 4.1 % of GFCF.

        Private corporate sector

        RBI

        GFCF  of sample joint stock companies are   blown up  on  the basis of paid up capital

        Household sector

        Enterprise Survey,

        1992-93

        Base year estimate are moved with minor mineral output

        Manufacturing, registered

        Public sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and Annual reports.

        Registered Manufacturing accounts for 25.2 % of GFCF.

        Private corporate sector

        RBI

        NABARD

        GFCF  of sample joint stock companies are   blown up  on  the basis of paid up capital and the Co-operative Societies are based on the data obtained from NABARD

        Household sector

        A S I

        GFCF estimated by using proportion of Gross Fixed Assets of household to the total GFCF of ASI. The data on flow of assets on GFCF of ASI are available from Annual survey of Industries.

        Manufacturing, unregistered

         

        NSS Unorganised manufacturing sector survey, 1994-95

        The benchmark estimates are prepared directly using the results of the survey.  Estimates for subsequent years are through extrapolation with GDP of the sector.

        This sector accounts for 9.0 % of GFCF.

        Electricity, gas and water supply

        Public sector

        Budget documents and Annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and Annual reports.

        This sector accounts for 12.6 % of GFCF.

        Private corporate sector

        RBI

         

        GFCF of sample joint stock companies are   blown up on the basis of paid up capital

        Household sector

        M/Non-Conventional Energy Sources

        Budget documents

        (i) G F C F=Number of bio-gas plants % Price of bio-gas plants

        (ii) Capital transfers to the households

         

        Construction

        Public sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        This sector accounts for 1.1 % of GFCF.

        Private corporate sector

        R B I

        GFCF of sample joint stock companies are blown up on the basis of paid up capital.

        Household sector

         

        Base year estimates of all institutional sectors are prepared by using capital output ratio (which is based on analysis of reports of some of public and private joint stock companies engaged in construction during 1981-82). For subsequent years estimates are moved by GVA growth.  GFCF estimates of public and private corporate sector estimates deducted from total GFCF estimates to get household estimates.

        Trade

        Public sector

        Budget documents and Annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        Trade sector accounts for 2.1 % of GFCF.

        Private corporate sector

        RBI

        NABARD

        GFCF  of sample joint stock companies are   blown up  on  the basis of paid up capital and the Co-operative Societies are based on the data obtained from NABARD

        Household sector

        Enterprise Survey 1993-94,WPI

        Base year estimate are prepared by using the survey results. For subsequent years estimates are moved by GVA growth.

        Hotels and restaurants

        Public sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        Hotels and restaurants sector accounts for 1.1 % of GFCF.

        Private corporate sector

        R B I

        GFCF  of sample joint stock companies are   blown up  on  the basis of paid up capital

        Household sector

        Enterprise Survey 1993-94,WPI

         

        GFCF estimated by applying growth of no. of enterprises and WPI price index.  Estimates of private corporate sector are deducted from these estimates.

        Railways

        Budget documents and Annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        Railways account for 2.8 % of GFCF.

        Transport by other means

        Public sector

        Budget documents and Annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and Annual reports.

        Transport by other means account for 6.2 % of GFCF.

        Private corporate sector

        R B I

        GFCF of sample joint stock companies are   blown up on  the basis of paid up capital

        Household sector

         

        Base year estimates are prepared by using Capital output ratio (which are based on analysis of reports of various shipping companies, airports, road transport companies and NSS enterprise survey results). For subsequent years estimates are moved by GVA growth.    Estimates of private corporate sector are deducted from these estimates.

        Storage

        Public sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and Annual reports.

        Storage sector accounts for 0.1 % of GFCF.

        Private corporate sector

        R B I

        GFCF  of sample joint stock companies are   blown up  on  the basis of paid up capital

        Household sector

        Enterprise Survey 1992-93

        Beyond Survey Year estimates are

        moved with GFCF as obtained for storage from   A S I

        Communication

         Public sector

        Budget documents and Annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        Communication sector accounts for 3.2 % of GFCF.

        Banking and Insurance

        Public sector

        Budget documents and Annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        This sector accounts for 4.1 % of GFCF.

        Private corporate sector

        R B I, NABARD

        GFCF of sample joint stock companies are   blown up on the basis of paid up capital and the Co-operative Societies are based on the data obtained from NABARD

        Real estate, ownership of dwellings and business services

        Public Sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and Annual reports.

        This sector accounts for 11.3 % of GFCF.

        Private corporate sector

        RBI

        GFCF of sample joint stock companies are   blown up on the basis of paid up capital

        Household sector

        AIDIS, 1991-92

         

        Budget documents

        Estimates are moved by applying growth of no. of residential houses and the WPI

        Capital transfers from the budget documents

        Public administration and defence

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        This sector accounts for 11.3 % of GFCF.

        Quasi Government Organisation

         ICAR and CSIR Reports

        Capital output ratio derived from these reports is applied on the GDP of the sub-sector

        Other services

        Public sector

        Budget documents and annual reports

        Capital outlay on construction and machinery as obtained from the analysis of Budget documents and annual reports.

        Other services account for 2.6 % of GFCF.

        Private corporate sector

        RBI

        GFCF of sample joint stock companies are blown up on the basis of paid up capital.

        Household sector

        Enterprise Survey 1991-92

        Base year estimates are from enterprise survey and for other years, estimates are moved with the growth in GFCF of other services for public sector.
  • Data gaps in the estimation of saving and capital formation
    • Saving
      • 13.6.14 The estimates of saving suffer from a number of limitations mainly due to deficiency of data. This particularly refers to the estimates on various financial instruments from the private corporate and household sector. Since saving is the excess of income over expenditure, the major data gaps relate to the household sector, NPISHs, local bodies and quality problems on the data of private corporate sector. In the absence of direct data, the estimates of saving of household sector in physical assets is derived as residual.
    • Gross Fixed Capital Formation
      • 13.6.15 Regarding the estimates of GFCF by type of assets, a number of rates and ratios are used in respect of both construction and machinery and equipment. For machinery and equipment, the data gap relates to domestic production in unregistered manufacturing sector. Surveys on this are conducted only once in 5 years. In the absence of annual data, the benchmark estimates are extrapolated with the GVA of the unorganised manufacturing sector. The proportions used for estimating the production of capital goods out of partly capital goods and part of capital goods are based on household durable goods as obtained from AIDIS, 1981-82. The AIDIS, 1991-92 did not collect information on household assets at the beginning and at the end of the reference period. In the absence of this information in AIDIS 1991-92, the rates and ratios prepared on the basis of AIDIS 1981-82 are being continued. Similarly, for estimates of GFCF by industry, the data gaps are the lack of annual Enterprise Surveys and surveys on NPISHs, as well as data on local bodies. With regard to local bodies, regular and complete accounts are available only in respect of four States, i.e. Maharashtra, Uttar Pradesh, Meghalaya and Delhi. The estimates of GFCF for the household sector are derived as residual, in the absence of direct data. Both the Raj Committee and Chelliah Committee were uncomfortable with household saving in the form of physical assets being arrived as a residual but did not suggest any alternative method.
      • 13.6.16 The estimates of change in stocks in household trading establishments are prepared on the basis of bank advances and other indirect approaches. The benchmark estimates come from the Enterprise Surveys, which have a periodicity of over 5 years.
  • Rates and Ratios used in the Estimation of GFCF
    • 13.6.17 In the compilation of GFCF, a number of rates and ratios are used. These in brief, are given below, along with the sources and their current status of updation.
    • Construction
      • Cement:
        • Transport margin from point of purchase to site of construction: 2 percent of the value of cement used in construction based on the IOTT -1993-94.
        • Cement used as input in other industries: 10.87 percent of total quantity of cement dispatched based on the IOTT 1993-94.
      • Cement Products:
        • Trade, transport and other charges: 25 per cent of the value of cement products used in construction based on the IOTT 1993-94.
      • Iron and steel:
        • Trade, transport and other charges: 23.1 percent of the value of iron and steel used in construction based on the IOTT 1993-94.
      • Timber:
        • Trade, transport and other charges: 7 percent of the value of timber used in construction based on the IOTT- 1993-94.
        • Timber used in construction: 48.5 per cent of production of timber on the basis of information contained in the Timber Trends Study for the Far East, Country Report for India, Inspector General of Forests, Ministry of Agriculture, 1958
      • Round wood:
        • Trade, transport and other charges: 50 per cent of the value of round wood used in construction based on the IOTT-1993-94.
      • Railway sleepers:
        • Trade, transport and other charges: 5 per cent of the value of railway sleepers based on the information obtained from the Railway Board.
      • Industrial wood:
        • Proportion of timber in the production of 91.86 per cent of the quantity based on information available from State Forest Departments during 1980s.
      • Proportion of round wood:
        • Proportion of round wood in the production of industrial wood: 7.95 per cent of the quantity based on information available from State Forest Departments.
        • Round wood used in construction: 38.3 per cent of the production of round wood on the basis of information contained in the Timber Trends Study, 1958.
      • Veneer Plywood :
        • Trade, transport and other charges: 25 per cent of the value of veneer and plywood used in construction based on based on the IOTT 1993-94.
      • Bricks and Tiles
        • Value of bricks produced by rural households for own use: 10 percent of the value of output of bricks and tiles produced in the unregistered manufacturing sector on the basis of data on working force engaged in the manufacturing of structural clay products as per population census.
        • Trade, transport and other charges: in organized sector, it is 27.8 per cent of the value of bricks and tiles on the basis of IOTT 1993-94.
      • Other construction Materials:
        • Value of 30 percent of the value of total materials used in construction: based on the information obtained from NBO, CPWD and CBRI during the 1980s.
        • Quantity of coal burnt for production of one-lakh bricks in the unorganized sector: 16 tonnes on the basis of the information collected from the office of the Coal Controller.
        • Factor Incomes (including CFC) going into accounted construction: 53.4 per cent of the value of all material inputs used in construction on the basis of information available from CPWD, NBO and CBRI, Roorkee in 1997. Value of construction in rural residential buildings (total estimated from AIDIS):
          • Accounted in commodity flow approach: 72 per cent of the total value of rural residential buildings
          • Unaccounted in commodity flow approach: 28 per cent of total value of rural residential buildings based on 49th round on housing conditions in India in 1992.
        • (The procedure for estimating the labour-intensive kutcha construction undertaken in the public sector, private corporate sector and household sector is by expenditure approach. While the estimates of public sector are prepared from the annual budget documents, those of the private corporate sector (plantations) are prepared on the basis of annual data on area of extensions, replacements and replantations available in the annual reports of Tea, Coffee and Rubber Boards as well as data on the cost of plantations as obtained from the respective Boards, those of household sector the estimates are based on the data thrown by the decennial survey All-India Debt and Investment Survey. )
        • Value of construction in urban residential buildings (total estimated from AIDIS):
          • Accounted in commodity flow approach: 80 per cent of total value.
          • Unaccounted in commodity flow approach: 20 per cent of the value of construction based on the information contained in 49th Round on "Housing Conditions in India in 1998".
      • Machinery and Equipment:
        • Parts of capital goods treated as capital goods: 50 per cent of the value. This proportion has been determined in the light of data contained in the annual reports of various manufacturing concerns. The proportions of partly capital goods attributable to capital formation are (See Annexe 13.6) are based on AIDIS, 1981-82, special Tabulation by the Reserve Bank of India for National Accounts Division of Central Statistical Organisation. The rates remain unchanged, as the AIDIS, 1991-92 did not have data at the beginning and closing of the year on consumer durables used by the households (did not collect this data in the survey).
        • Parts of partly capital goods: 50 per cent of the proportions applicable to respective partly capital goods.
      • Change in Stocks
        • Estimates of inventories in unregistered manufacturing sector: based on the results of 51st round of NSSO Survey, 1994-95 results.
        • Estimates of stocks of food grains with the private traders: based on results of enterprise surveys on trade, hotels and restaurants. Estimates for subsequent years are made by extrapolating the benchmark data with the bank advances given to these enterprises.
      • 13.6.18 Recommendations on estimation of Saving and Capital Formation :
        • The problems in the estimation of saving and investment of the private corporate sector have been traced to the doubts about the representative character of the sample companies and inadequacies in the blow-up factor. It is recommended that corrective steps contained in the recommendations in Chapter 12 of the report on the Corporate Sector be implemented speedily.
        • The second major weakness in the estimation of saving and investment relates to the indirect residual estimation of savings in the form of physical assets undertaken by household enterprises and own account un-incorporated enterprises for which decennial all India debt and investment surveys provide benchmark estimates. It is therefore recommended to (a) examine the feasibility of reintroducing the receipts and disbursement block with last 365 days as a reference period as was the case with the National Sample Survey integrated household schedule from 1964-65 (19th round) to 1970-71 (25th round) in the current annual surveys of household consumer expenditure; and (b) experiment with the survey methodology for improving the estimation of capital formation from the enterprise surveys.
        • Various rates and ratios are used in the estimation of Capital Formation in construction, machinery and equipment and change in stock as also in the estimation of trade and transport margins. It is recommended that necessary type studies (Appendix-13.2) to update them be carried out in a geographically dispersed fashion.
        • The following observations which appeared in the Chelliah Committee Report are still valid and need attention of the concerned agencies for implementation:
          • A reasonably expeditious system needs to be evolved to reduce the time lag in making available the flow of funds accounts.
          • Dissemination of details of capital financing separately on foreign direct investment, domestic investment and borrowing, retained earnings of foreign controlled rupees companies and branches of foreign companies in National Accounts.
          • The Perpetual Inventory Method of preparing the estimates of Consumption of Fixed Capital may be reviewed periodically for assumptions made regarding the average life of various assets.
          • All States should compile estimates of total capital formation.
          • Public sector information in respect of local bodies should be improved. States need to make arrangements for consolidation of statistics from the annual statements of receipt and expenditure in respect of their local bodies.
          • For improving the estimates of saving and capital formation for the corporate sector, the top 1500 companies (out of over 3 lakhs companies), which would account for a predominant proportion of total saving/capital formation should be covered on a census basis. For the remaining companies estimates may be built up on a sample basis.
          • The flow of funds data should be used for estimating household saving in the form of currency. For the years for which flow of funds data are not available, the average ratio for the past three years should be applied.
          • Consumer credit extended by banks and non-banking financial companies should be shown separately in the National Accounts Statistics.
          • Feasibility of conducting independent income expenditure surveys on a periodic basis should be explored for validation of the estimates generated by Central Statistical Organisation through residual method for the household saving in the form of physical assets.
          • Present All-India Debt and Investment Survey (AIDIS) covers only households. Entire household sector includes unincorporated enterprises and non-profit institutions as well. To obtain the estimates of complete household sector, Enterprise Surveys on the lines of AIDIS may be designed and conducted periodically preferably every five years.
          • In the case of deep discount bonds and zero coupon bonds, interest accruing needs to be spread out.
          • All new financial instruments such as warrants which are traded apart from the underlying securities to which they are linked should be taken into account in the estimation of saving as and when complete relevant data become available.
          • Software and database which are purchased from the market by the business enterprises should be treated as part of capital formation. However, the increase in productivity of the existing software due to development of utilisation techniques should not be treated as part of capital formation.
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