GDP OF HEALTH SERVICES
– INDIA’S ESTIMATION
PROCEDURES
Ramesh Kolli
Additional Director General
Ministry of Statistics & Programme Implementation
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Outline of presentation
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Issues
Coverage of Health Services
Sources of Data
Method of Estimating GVA at nominal prices
Method of Estimating GVA at constant prices
Concluding remarks
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Issues
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Measuring output and value added of services is difficult, compared to goods
producing industries
– Especially if these are for non-market producers and at constant prices
Generally, output in nominal terms is measured
– For market producers from the books of accounts broadly as sum of sales and
changes in inventories
– For non-market producers, on input cost approach, as sum of inputs, compensation
of employees and consumption of fixed capital
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For both market and non-market producers, output and value added in real
terms is estimated applying price deflators (CPI/PPI) or by extrapolating base
year estimates with volume indicators
This procedure gives rise to incorrect measures of volumes of output,
especially for non-market producers
Vast literature on better measurement is available in public domain
– OECD Handbook ‘Measuring Education and Health Volume Output’
– The 1993 SNA
– UK-ONS’s Atkinson Review on Measurement of Government Output and
Productivity for the National Accounts
– Eurostat Handbook on price and volume measures in national accounts
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Coverage of Health Services
• 3-digit codes of ISIC Rev 3.0 :
• 851 – Human Health Activities
– 8511 - Hospital activities
– 8512 - Medical and dental practice activities
– 8519 - Other human health activities
• 852 – Veterinary activities [including clinicopathological and other diagnostic activities
pertaining to animals and birds]
• 853 - Social work activities – not included, though
it is part of Tabulation Category N and Division
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Sources of Data
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Public Sector (general government)
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Budget documents of all levels of government
Private Corporate Sector (non-government financial and non-financial
corporations)
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Annual accounts
Private Unorganised Sector (Household sector and NPISHs)
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Benchmark estimates through Labour input method
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Employment (jobs) in unorganised sector – 5-yearly surveys
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Value added per worker – 5-yearly enterprise surveys
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Annual estimates
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Administrative data on number of medical and para-medical
personnel
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household consumption expenditure of health services – annual
growth rate estimated from the 5-yearly Consumer Expenditure
Surveys of NSSO
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Method of Estimating GVA at
nominal prices – public sector
• input cost approach (total costs incurred in their production)
• sum of intermediate consumption, compensation of employees,
consumption of fixed capital (CFC) (for output at factor cost) and other
taxes, less subsidies, on production (for output at basic prices).
• Data on intermediate consumption and compensation of employees is
compiled by analysing the budget documents (i.e., after reclassifying
the item-wise expenditures of government according to economiccum-purpose classification) of all levels of government
• For CFC, since no allowance is made in budgets, it is estimated
separately through the perpetual inventory method (PIM)
• For GVA, intermediate consumption is excluded from the output
• No operating surplus for public authorities
• Measured on cost basis – not accrual
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Private corporate sector
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Annual accounts analysed by RBI
GVA at factor cost is measured as gross output less intermediate
consumption or as sum of compensation of employees and gross
operating surplus. The production taxes net of production subsidies
is added to the GVA at factor cost to obtain GVA at basic prices
The RBI analysis is based on sample accounts, and sometimes
reliable estimates are not available for health services
Alternative is the labour input method
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Administrative sources for annual employment data
Value added per worker from enterprise surveys-corporate sector part
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Annual estimates - using annual growth rate estimated from the 5-
yearly Consumer Expenditure Surveys of NSSO
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Private unorganised sector
– labour input method
– GVA estimated initially for a benchmark year using the
labour input method
– Other years - benchmark GVA is extrapolated with
suitable indicators – growth in consumption
expenditure
GVA of health
services in private
unorganised
sector in the
benchmark year
=
Workforce in establishments producing health services in
private unorganised sector (total workforce in this
activity– workforce in public and private corporate sectors
in the same activity) * Gross Value Added Per Worker
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Contd…
• GVA data released both at factor cost and at basic
prices
• For the basic price estimates, information
available from the budget documents is on total
production taxes and total production subsidies
• these are allocated to different sectors and
industries on the basis of year-wise estimates of
net capital stock
• Out of the total GVA of health services, public,
private corporate and private unorganised sectors
account for 30%, 10% and 60%, respectively
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Method of Estimating GVA at
constant prices
• Public Sector
– deflate the corresponding estimates of output and GVA at nominal
prices by the CPI for industrial workers, which is used as a wage
index for government employees
• Private Corporate Sector
– Volume indicators of number of medical and para-medical
personnel
– Due to time-lag and also this procedure does not take into account
improvements in productivity, this volume indicator has been
discontinued
– Presently current price estimates are deflated by the CPI.
• Private Unorganised Sector
– current price estimates are deflated by the CPI
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CONCLUDING REMARKS
• Measuring health services output at nominal prices or in real terms, by
both market and non-market producers is extremely challenging.
• same services are measured differently for market and non-market
producers
• The real output should be measured in terms of volumes which takes
into account the outputs, outcomes and quality of services, both for
market and non-market producers
• However, in practice it is difficult to obtain reliable data on these, and
there is also the problem of aggregating volumes of different health
services into a single output indicator
• Important points
– Capital stock and CFC estimated through PIM
– Public sector – all levels of government and autonomous government
institutions are covered
– Labour input method for exhaustiveness
– CPI which is a kind of wage index, used as deflator for real GVA
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Thanks
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