Informal Sector in National Accounts Estimation: Importance of Workforce and Productivity

Estimating value added in the informal sector is a challenge to official statisticians. By the very nature of the sector, these are enterprises which have no regular record of activities, books of accounts, and times even place of work. The estimation of value added for such entities reflects one of the great achievements of Indian statisticians. Typically this has been done by combining data collected from NSS sample surveys of households, household enterprises, and the population census. All of these have been done at regular intervals in India. The typical perception about these entities has been that they function on the margins with little or no change in production organisation or technology. However, sample survey data in recent years has been hinting at significant changes in the way these enterprises carry out production. In this connection understanding the contribution of the different types of workers engaged in these activities is central to calculating their value added. This paper reviews the changes introduced in the methodology of calculating value added in the Informal sector in the 2011–12 base revision.