SERVICES SECTOR, ITS IMPORTANCE & LIMITATIONS OF DATA

In terms of industrial categories, The Services Sector inter-alia includes sub-sectors like Trade; Hotels and Restaurants; Transport; Storage & warehousing; Communication; Banking and Insurance; Real Estate; Business services; Public administration and defence; Social and personal services; and Other services including Education, Medical and Health, Religious and Other Community Services, Legal Services, Recreation and Entertainment Services.

This Sector constitutes a large part of the Indian economy both in terms of employment potential and its contribution to national income. CSO, MOSPI is responsible at the Central level to prepare GDP (Value Addition) estimates for the Indian Economy. The estimates are being released through ages now. The official site of MOSPI does admit the significance and importance of the Sector. More than fifty per cent of total GDP (value addition) comes from the Service Sector. Although the services sector has a pivotal role in the country’s economic development, database in this sector is highly disorganized. A major limitation of the existing statistical system in this respect is the absence of a well organized mechanism for maintaining a regular and proper database for this sector. One may also infer that calculations of our national income may be in trouble as the major part of it having the basis of its calculations on wrong footing. Unlike the Annual Survey of Industries (ASI) that is devoted to collection of data from manufacturing and few other categories of units included in the lists maintained by the Chief Inspectors of Factories, there is no such scheme in the services sector for annual collection of data from the units either having a large number of workers or those contributing significantly in terms of annual turnover. The main difficulty in this regard is the non-availability of an up-to-date frame of such units and lack of regular mechanism for collection of data. The development of National Business Register being envisaged based on the Sixth Economic Census is likely to address the issue of frame to a large extent.

Given the importance of the sector and its diverse nature and lack of data on an annual basis, the need for compiling the Index of Service Production (ISP) with an appropriate periodicity has been felt for a long time. Accordingly, the Central Statistics Office (CSO), MOSPI constituted a Technical Advisory Committee (TAC) under the Chairmanship of Professor C.P. Chandrasekhar to develop methodology for compilation of the ISP. The work on compilation of the ISP for different sub-sectors of the economy has been started in a phased manner, with priority given to some sub-sectors like railways, air transport, postal services, banking, telecommunication, which are more organized in terms of availability of data. The base year of ISP is taken as 2004-05. The said ISP is a volume index at constant prices. More precisely, it is defined as the ratio of the volume of output produced by the services industries in a given time period to the volume produced by the same industries in the specified base period. In the absence of regular surveys the ISP, it is likely to serve as a short-term measure of assessing the growth of services sector. It can be seen that as on today, we do not have any Index of Service Production even for any of its sub-sectors. Regular Surveys or other sound estimation procedures based on constituents’ annual output and value addition for the various sub-service sectors should also be thought of on some regular/annual basis.