Measuring the Informal Economy

Introduction

Ever since the advent of Demonetization and even more so since COVID-19, there have been many academics who have been pointing out that our GDP estimate is probably an overestimate considering it doesn’t capture the output from the unorganized/ informal sector at all. Along with it, it is mentioned that the informal sector is like a black-hole, and we have no idea what is happening there. For the GDP measurement, it is generally believed that the unorganized sector is assumed to move in tandem with the organized sector and no other data is available. 

Typically, every five years there are surveys conducted to determine informal sector activities. These surveys are conducted for Informal Manufacturing, Trade and Repair, and Other Services sectors (excluding Ownership of Dwelling sector which is a notional entry/ opportunity cost). The last such survey was conducted during the year 2015-16. These surveys also do not measure informal sector activities in Agriculture, Mining and Construction though.

The scope of this article would be to provide a bird’s eye view on how informal sector is measured for our GDP calculations during the inter-survey period. Typically, First Advance GDP estimates are released in January of a financial year (e.g., the Advance Estimates for FY23 was released on 6 January 2023). Second Advance estimates are released in February of a financial year (for FY23, it will be released on 28 February 2023). Provisional GDP estimates for the FY23 would be released on 31 May 2023, then First Revised Estimates for FY23 would be released on 28 February 2024, Second Revised Estimates on 28 February 2025 and Third Revised Estimates on 28 February 2026. So, the GDP estimates for a particular year is finalized after almost a long period of 3 years.  

Further, we shall also look at other data points, although not used for the GDP measurement, which can help us understand the informal sector activities. This is specifically important since three major events i.e., Demonetization, GST and COVID occurred post the previous survey.

In principle, this article also mentions many indicators from the formal sector (with negligible presence of informal sector) to measure activity in sectors which are largely informal. Examples include Cement-Steel production for Construction sector, Motor Vehicles and Petroleum consumption for Transport Sector etc.

One of the most important sources used to measure our GDP for the Private Corporate Sector is the MCA 21 database. This has data of all listed and unlisted companies. While there are some LLP companies registered in it, most of them are from Private Limited and Public Limited companies. Further, the Government sources data from Central, State Budget documents, Annual Reports of PSUs etc. From the Formal Sector, Government (including the PSUs) sector contributes almost 18% of our overall GVA (Gross Value Added) while the Private Corporate Sector contributes almost 30%.

While there are many definitions for the informal/ unorganized sector, from the perspective of GDP measurement and for the purposes of this article, informal/ unorganized sector can be considered as those enterprises which are not available from the sources mentioned in the above paragraph. These typically fall under the following types:

  • Quasi Corporates: Unincorporated enterprises maintaining accounts
  • Household enterprises: Unincorporated enterprises not maintaining accounts
Size of the Informal Sector

Table 1

Source: S3 and Author’s calculations

As per an IMF paper (Source: S3), during the year financial year 2017-18 (FY18), ~52% of our overall economy was in the informal sector (includes both Quasi Corporates and Household enterprises).

GVA represents Gross-Value added. GDP is basically GVA plus indirect taxes (net of subsidies).

Agriculture (15% of GVA)

As can be observed in Table 1, Agriculture is mostly in the unorganized sector. The estimates of the various sub-sectors are prepared basis the following:

  • Crops (9% of Overall GVA):
    • For the Major crops, like Wheat, Rice, Sugarcane, Pulses etc. sowing area is released on a weekly basis for Kharif and Rabi seasons. Besides state governments conduct survey on yield etc. to arrive at the production statistics for Crops.
    • For Minor crops, quarterly estimates are prepared using production targets while actual production data will be available for annual estimates, albeit with a lag. 
    • For Crop sector, 3-4 rounds of Advance estimates are prepared during the crop year (July-June cycle, which is different from the financial year cycle) based on actual data available at that point in time and with a lag of almost 8-9 months, actual data is used. This would be used to update the numbers in the First Revised Estimates.
  • Livestock (4% of overall GVA):
    • Major products are Milk, Meat and Eggs.
    • State-wise Integrated Sample Surveys are conducted to arrive the production figures. Since this is available with a lag, typically the quarterly estimates are created using targets. For the Annual Revised Estimates (not provisional), actual data would be available.
  • Fishing (1% of overall GVA): Quarterly and Annual numbers are prepared using actual data.
  • Forestry (1% of overall GVA): Quarterly estimates are based on extrapolation of previous trends. Annual numbers for the most part is prepared using actual data available while some part is projected using surveys conducted many years back.

As seen above, initial quarterly GDP estimates have some portion that is based on actual data while some portion is based on targets/ extrapolations etc. However, for the Revised GDP estimates (Second and Third Revised Estimates), most of it is based on actual production data. While the data may not be perfect, it is based on primary data and not based on extrapolations/ formal sector data.

Manufacturing (4% of GVA)

For the Private Corporate Sector, almost 40% of its total GVA comes from Manufacturing, 10% from Financial Services and another 20% from Business Services (mainly IT services).

For quarterly estimates, the Private Corporate Sector GVA is measured using the data from listed companies (which itself may only contribute 25-30% of overall GVA of private corporate sector (Source: S7)). However, when Revised GDP estimates become available a year or so later, most of the Private Corporate Sector would be covered since MCA-21 would then include the data for unlisted companies as well.

In the Manufacturing sector, informal manufacturing would contribute almost 25% of the GVA. For the informal manufacturing sector, Index of Industrial Production Data (IIP) (which looks at production data for formal sector factories of all sizes) is used for the quarterly estimates and the yearly estimates until Annual Survey of Industries (ASI) is available. ASI also covers formal manufacturing sector and it comes with a 2-year lag. Accordingly, this can only be incorporated into the Third Revised GDP estimates (which is released after a lag of almost 3 years). Accordingly, it can be said that for manufacturing, the formal sector is used as a proxy to measure the informal sector.

However, it is not as bad as it sounds considering:

  • While formal sector manufacturing is used as proxy for informal sector activity, one will have to qualify it by saying formal MSMEs are used as proxy for informal MSMEs. This is because even though ASI data is used to measure informal sector activities, Non-Corporate ASI (companies which are not Public or Private Limited Companies and will basically include proprietary firms, LLP, cooperatives etc.) is used to compute the GVA  of the informal sector manufacturing companies (Source: S2). 
  • To see whether it is appropriate to consider Non-Corporate ASI as proxy for the informal manufacturing sectors, we compare the relative sizes (in terms of GVA per factory) of various types of organizations (Sources: S4 and S8). In Table 2 below, Informal Own Account Establishments (OAE) are establishments which only has the proprietor and no permanent helper. Informal enterprises (IE) on the other hand have at least 1 permanent worker over and above the proprietor. As can be seen below, if the GVA per factory for OAEs is INR 1, the GVA per factory for Public Government companies is INR 17,349.
  • Further, the size difference (in terms of GVA per factory) between OAEs and IEs itself is 1:9 and the size difference between IEs to Non-Corporate ASI firms is around 1:15. A similar analysis can also be made using employee per factory data. Considering this, one can say that Non-Corporate ASI can at least be used as proxy to track the activities for IEs while it is too large to use as proxies for OAEs. Further, IEs contribute almost 60-65% of the GVA of Informal Sector (Source: S4), so in a sense, one can say that at least 2.5% of the manufacturing sector can in a way be well tracked by the Non-Corporate ASI data.
Table 2




  • Also, there is a symbiotic relationship between the formal manufacturing and informal manufacturing sectors. As per the Informal Enterprise surveys of 2015-16 (Source: S5), almost 30% of the informal enterprises work almost exclusively on contract manufacturing basis. This can be reasonably assumed to be contract manufacturing for formal sector enterprises. Accordingly, almost 30% of informal manufacturing is linked to the fortunes of formal manufacturing. This had increased from 20% in 2011.
  • With the onset of GST, the total number of GST taxpayer base increased from 66.25 lakhs to 1.28 cr (Source: S9). Accordingly, if anything, the pace of linkage between formal and informal manufacturing sector enterprises would have increased and as of now may be even up to 45-50% of the informal sector enterprises would be doing contract manufacturing for the formal sector.

Considering all the aforesaid factors, around three-quarters (~3% of GDP) of informal manufacturing GVA can be said proxied well by the formal manufacturing.

Construction (6% of GVA)

Almost 3/4th of overall construction GVA comes from the informal sector. As mentioned above, other than the economic census, no survey is conducted to measure the size of the informal sector in construction. I believe, this may be because Construction sector can be well tracked by formal sector data itself. Construction is mainly divided into Kutcha and Pucca segments and the Pucca constructions constitute almost 95% of the overall construction GVA and out of the Kutcha constructions, almost half of it comes from Government funding, the rest is purely informal (Source: S1).

Now, coming to Pucca construction, Cement GVA is calculated using Commodity flow approach i.e., in this case, based on the flow of inputs. Almost 60% of the total input costs (including service costs) come from Cement & Cement Products and Iron & Steel. Out of the total consumption of both these materials in all sectors, majority of it would be used in the construction sector.

Coming to Cement, it is a capex heavy sector and has a total production capacity of 537 mn MTPA as of FY21. The capacity of mini cement plants (capacity of less than 700 MT per day) is only 11.1 mn i.e., 2% while the rest consists of large cement plants (capacity of 1 mn MTPA) (Source: S10). Considering these, one can safely assume that Cement sector is mostly formal in nature.

Similarly, Steel is also a capex heavy sector. As per the Informal Enterprise Survey of 2015-16, the informal sector GVA of Manufacture of Basic Metals is INR 2,158 cr compared to an overall GVA of the sector of INR ~100,000 cr (Sources: S4, S8). Accordingly, this would mean that only around 2% of the Steel sector would be informal in nature. However, it should be noted that this survey does not include contributions from Quasi-Corporates. Even if that is considered, informality will most likely not go beyond 3-4% of the Overall Steel sector.

Other materials used for construction would include Paints, Tiles, Wood etc. which has a large element of informality. However, considering that the most critical inputs are mostly based out of the formal sector, one can assume that at least 80-85% of informal sector construction (~5% of GVA) can be properly tracked.

Mining (1% of GVA)

Around 25% of overall mining sector is in the informal space. As per author’s calculations, one of the largest components of the informal sector in mining is coming from Sand (may be contributing almost 60-70% of overall mining sector in the informal space). 

Since the direct calculations of Sand output was found to be an underestimate, it was found that an indirect estimate was required. Since Sand is used mostly in construction, it was found out that Sand constituted almost 8.2% of the Construction sector input costs based on Surveys. This method (adjusted for trade and transport margins) is used to arrive at the GVA for Sand for construction and data from Indian Bureau of Mines is to arrive at overall GVA for Sand. 

For other sub-sectors, each State department of Geology collects data relating to minerals (Source: S3).

Accordingly, one can safely assume that informal sector activity in mining is well tracked.

Transport (3% of GVA)

Informal transport is mostly in the road sector and out of the total Road Transport GVA, around 85% is informal in nature. One of the most import metrics used to measure this is the growth in registered vehicles which is a fair metric to measure the informal transport sector. It is fairly obvious that Vehicle manufacturers (whether it be two-wheelers, cars, trucks etc.) are only in the formal sector.

It is generally believed that increase in registered vehicles is generally a leading indicator and not a concurrent indicator. Accordingly, while not used in GDP measurement, another metric that can be used would be petroleum consumption (which can be adjusted for consumption of LPG, Bitumen etc. which are not related to transport per se). One should note that Petroleum production is also almost fully formal in nature. Hence, one can measure an informal sector transport very well using formal sector metrics.

Trade and Repair (10% of GVA)

Almost 90% of this sector is informal in nature (since organized retail penetration in India is still small). This sector is broadly split into Trade and Repair of Motor vehicles which contributes almost 8% of GVA of the informal Trade sector and Other Trade which constitutes the rest.

The Government measures this sector by using the residual sales tax growth (i.e., Sales tax/ GST converted to Turnover and adjusted for payments made by Private corporates and Government). As per the Government, this indicator tracks this sector better. One should note that a significant chunk of the Retail sector may be missed from this since there would be many retailers who don't pay sales tax or many who pay less than actuals. Further, a reform like GST which would have reduced the informality (at a faster pace as mentioned above) may have led to an over estimation of growth because the number of additions of say, retailers, to the sales tax bracket would have been higher than the increase in the total number of retailers. On the other hand, because of the GST implementation at least in the initial years, many more retailers may have disclosed lesser amounts for GST payments than their actual sales. However, since 2021 onwards the GST system has largely stabilized, and this indicator may be an appropriate proxy for the Trade sector now. Overall, while this is not as good an indicator as compared to the other indicators discussed above for measuring informal sector activity, it is not way-off.

The next issue is whether the firms registered under GST/ Sales tax is representative of the informal sector which carries out Trade activities. While one can't confirm on the representativeness, a rough analysis as per the Economic Survey 2017-18 (Source: S14) indicates that firms which represent almost 2-3rds of the Turnover of the informal sector (under all sectors which would include trade as well) may be covered under GST. This seems to be sufficiently representative (at least to me) provided that the new registrations to the GST are appropriately adjusted (to avoid overestimation of the growth rates).    

One has to caveat by saying that there is no new note on the approach post the implementation of GST. However, even with GST it should be possible to take out the GST paid by informal sector for products using the approach describe above. As an example, "A Statistical Report on Completion of 5 years of GST" shows the GST paid by different types of organizations (including Proprietorship companies etc.) (Source: S13). So, one can safely assume that the method would not have changed. 

Alternatively, Trade consists of the goods (agriculture and manufacturing) which are produced in the country adjusted for net imports, change in inventories, intermediate products (products which are not consumed by the end consumer) and self-consumption. 

Considering the following, Trade sector can be well-tracked even though almost 90% of trade is in the informal sector:

  • Agriculture is well-tracked by the Government
  • A large part of informal manufacturing is linked to formal sector and a large part of the rest can be tracked using Non-Corporate ASI
  • Exports and Imports are purely in the formal sector

Accordingly, as proxies for measuring the trade sector, we can use the following sources:

  • Trade and Repair of Motor vehicles can be tracked by sales of vehicles and as mentioned above vehicle manufacturing is purely formal sector.
  • Since a large portion of Trade sector would be Consumer Durables and Non-Durables the following indicators can also be used as proxies:
    • Agriculture growth
    • Nielsen IQ FMCG sales
    • Since some of the Consumer Durables like ACs/ TVs/ Fridge etc. is manufactured mostly by formal sector enterprises, the IIP growth of these items/ Analyst reports that track this sector can be used
    • IIP Consumer Durables and IIP Consumer Non-Durables - While this tracks only the formal sector activity in a sector with a large informal sector presence, it can be used as a good proxy
    • Private Final Consumption Expenditure in GDP (while it would include services can be a good proxy)

Ownership of Dwelling (6% of GVA)

Typically, a person who rents a house to another person earns rental income. However, if this person itself occupies the house, the services of the owner-occupied house are included in GDP calculation as if the owner rents the house to himself as a tenant. This is fully an informal sector activity and is also purely notional in nature.

For the Urban households, inter-censal growth (i.e., growth observed between 2001 and 2011 is used). On an overall level, this is fine while it there may be a slight overestimate considering:

  • The overall population growth rate from 2001 to 2011 was around 1.7%. As per the Civil Registration System (CRS) Data (Source: S11), on average around 2.7 crore births and 80 lakh deaths happen every year. This is almost an addition of 1.4% of population every year.
  • An event like COVID which had large scale Urban to Rural migration would not sit well with this assumption.

For the Rural Households, the growth is based on Annual Capital Formation (which would mainly use indicators used for growth in Construction sector) which is fine.

Until a census is conducted, we can use the following as proxies for this sector:

  • Population growth using CRS data which comes after a lag of 1-1.5 years, but broadly follows the same trend every year.
  • Growth in percentage of population living in Pucca houses as per National Family Health Surveys. This survey is carried out every 5-7 years.
  • Growth in percentage of population living in Pucca houses and percentage of population living in Own houses as per Survey on Drinking Water, Sanitation, Hygiene and Housing Condition in India by National Statistical office. This survey is carried out every 5-7 years.  

Other Sectors (7% of GVA)

The following sectors use indicators which is a mix of corporate growth, service tax growth etc. which may not be appropriate especially during exceptional years.

  • Hotels and Restaurants, Real Estate, Business Services etc. (~2% of GVA): Corporate growth is used to track growth in the informal sector. While not used in the official GDP computations, for the Hotels and Restaurants sector, one can also use Tourism Statistics (factors like Foreign Tourist Arrivals, Domestic Tourist activities) released by the Ministry of Tourism to broadly track activity for Hotels and Restaurants sector. This sector is almost 75% unorganized and hence, the growth in the Tourism Statistics will mostly accrue to the unorganized sector. One should note that this comes with a lag.
  • Informal Education sector and Health (~1.5% of GVA): Growth measured by using Consumption Expenditure growth for these segments. This growth is based on surveys carried out in 2011-12 which is not appropriate to measure the GDP currently. A better measure for this sector would be using Formal sector growth rates itself rather than decade old surveys. 
  • Financial Services (0.6% of GVA): The Unorganized Sector for FY12 was mainly measured using the All-India Debt and Investment Survey of the National Statistical Office of 2013 (AIDIS) and 2010-11 Unorganized Enterprises survey. This segment constitutes almost 10% of the Financial Services sector. While I do not know how it is estimated, it may be based on Corporate Sector Data or based on Inter-Survey growth rates and are not appropriate. As an aside, in one of the interviews between Mr. Karan Thapar and Dr. Pronab Sen, it was mentioned that the informal sector financing was almost destroyed by Demonetization. However, as per Author’s calculations, it seems that the growth in the unorganized lending space has grown by 0.3% CAGR (adjusted for inflation) between June 2012 and June 2018 as per the AIDIS surveys. While the growth is barely anything, at least is seems to suggest that it did not go down. Also, a point to note is that the nominal growth in loans outstanding for the formal sector as per AIDIS was around 80% in 6 years. However, if one looks at the loans outstanding for Banks from FY12 to FY18 (as per RBI data) for the Agriculture sector and Personal Lending, it grew by almost 120%. Further, the total loans outstanding for the formal sector using RBI data (which is based on hard data and not a sample survey) is INR 29 lakh crore while as per AIDIS, 2019 it would be close to INR 20 lac crore. So, there seems to be some degree of underestimation in AIDIS as well.
  • Electricity, Gas and Water Supply (~0.1% of GDP): Mainly using Corporate/ Formal sector growth
  • Personal Services and Others (~2.5% of GDP): Using a mix of corporate growth, 2011-12 survey on Consumption Expenditure growth, Service Tax growth and Population Growth.
The reason that Sales Tax growth in more reasonable for Trade sector while Service tax is not appropriate for service sector activities is mainly on account of the fact that for Trade sector, Sales tax/ GST is adjusted for the collections from the Formal sector and it is the residual number which is used while in this case, it appears the residual approach is not used in Service tax collections. Further, these Services have a higher element of formal sector presence while the Trade sector is majorly informal.  

Some High Frequency Indicators (HFIs)

The following are some HFIs (available at least on a monthly basis) which can be used to track the trends in the informal sector. There was recently one paper in the RBI bulletin (S12) which mentioned some HFIs which can be used to track the informal sector. They are as basically split into indicators for Agri and Non-Agri informal sector. 

For Agriculture

  • Diesel consumption: Light Diesel Oil
  • Rainfall Deviation
  • Tractor Sales
  • IIP Consumer Non-durables
For Non-Agriculture
  • IIP Consumer Non-durables
  • Automobile Domestic Sales: Threewheeler
  • Steel Consumption
  • Cement Production
  • Housing Loans
  • MGNREGA: Work Demand Persons
Further, it suggests a composite index with 9 indicators which excludes Rainfall Deviation, IIP Consumer Non-durables and Housing Loans from the above lists, and includes Fertiliser Sales, Retail Credit Transfer: AePS Fund Transfer and Cash withdrawal at micro-ATMs. 

These indicators to a small extent can measure the trends in Agriculture and Consumption demand (mainly Trade sector). Steel/ Cement/ 3W sales can measure the Informal construction and Transport sector well. However, they do not measure the Manufacturing sector and Other services at all.   
    
Some of these indicators, we have already discussed above for their respective sectors. Further we can add the following HFIs as well to track unorganized sector activities to a larger extent, but not comprehensively:
  • Kharif and Rabi Sowing pattern (available on a weekly basis during the respective sowing season)
  • MSME loans outstanding (available from RBI on a fortnightly basis)
  • Two-wheeler sales (available monthly)
  • Commercial vehicle sales (available monthly) 
  • Passenger vehicle sales (available monthly)
  • Adjusted petroleum consumption (available monthly, adjusted as mentioned above for the Transportation sector)
  • IIP Consumer durables (available monthly)
  • GST collections (available monthly)
  • GST e-way bills (available monthly)
  • RBI Financial Stability Report which among other things gives credit growth of MSME sector along with the NPA ratios (available half-yearly)      

Recommendations for improving GDP measurement in informal sector

  • Carry-out Unorganized Enterprise surveys at least once in every three years
  • For Transport Sector, petroleum consumption (adjusted for non-transport consumption of petroleum) along with increase in vehicle registration can be used. Adjusted petroleum consumption alone may not be appropriate due to the increasing EV penetration. 
  • For Trade Sector, along with the Sales Tax/ GST data, Private Final Consumption Expenditure (excluding Services) can be used.
  • For Manufacturing, until ASI is available, IIP data of smaller factories should be used to determine the output of the unorganized sector.
  • For Other Services like Business Services, Health, Education and Personal Services, one can use Corporate Growth, but using the smaller sized corporates rather than the whole corporate set until point (a) becomes available. Alternatively, the residual approach for Service taxes can also be used to arrive at the growth of these sectors (not applicable to Education and Health though). 

Some quick proxies

  • Cash in circulation: At the point of origin, cash is a fully "white". Generally, cash in circulation will increase over the longer term in line with the growth in the economy (Source: S15). Further, data available from FY04 to FY16 (pre-demonetization) suggests that cash in circulation remained in a narrow range of 11.4% to 12.3% of GDP (Source: RBI, National Accounts data). It substantially reduced during the demonetization and post-demonetization years, but came back to the above mentioned range from 2019 onwards. In FY21 (COVID year), it went above that range to 14.4% but is gradually narrowing now to the earlier range. In spite of all the digital adoption, if cash in circulation is still within the earlier range, one can safely conclude that our GDP calculations even currently is largely accurate or largely accurate compared to the earlier series/ earlier years in nominal terms. 
  • M3: Basically, cash with public plus deposits (demand and time deposits) with banks and RBI. This basically represents the actual money available in the system. From FY11 to FY16, it varied within a range of 81.5% and 84.6% of GDP. Even in FY17 (demo year), it was 83.5% and has remained within that range except for the COVID year when the GDP was reduced on account of suppression of economic activity due to lockdowns. This also supports the conclusions mentioned above.
  • These points can sufficiently help us conclude that the GDP at an overall level (in nominal terms) is more or less accurate while the sector specific data may be actually different.    
Conclusions

For the quarterly GDP estimates (typically released after 2 months the end of a particular quarter), we have seen that there are a lot of estimates and assumptions even for the Formal sector since mostly data from listed company filings are used along with figures from Central and State Governments. 

For the Informal Sector (excluding agriculture where actual production data and targets are used), mostly formal sector data is used like IIP, Cement production and Steel consumption, Vehicle growth etc. However, these formal sector indicators can track the informal sector (like Construction, Transport etc.) quite well considering the near absence of informal sector in the major inputs for these indicators while they are inevitable to the working of the respective informal sectors.

For the Revised GDP estimates, the Private Corporate sector and Government sector data is quite comprehensive.

Further, for the informal sector:
  • The Agricultural sector would also be based on the actual production data rather than targets used in the first Quarterly estimates
  • Manufacturing sector while based on Non-Corporate ASI, considering the interlinkage between the formal and informal sectors as well as the relative size between Non-Corporate ASI and IEs, the informal sector for manufacturing would also be represented well.
  • Construction sector is well tracked since it is largely based on Cement and Steel (which have barely any informal sector presence)
  • Mining sector is well tracked since Sand being one of the major components, is arrived mainly derived from Construction sector. For other sub-sectors, State departments collect the data.
  • Transport sector is well tracked since it is largely based on vehicle registration (which have barely any informal sector presence). Also, Adjusted Petroleum consumption as mentioned above can be used as a proxy for this sector.
  • Trade and Repair sector while it uses a good indicator and not based on corporate data has significant scope for improvement
  • Ownership of dwellings is well tracked, it is a sector which naturally grows in line with the population growth, urbanization, increase in pucca house dwellings etc. (Average growth from FY15 to FY20 is only 2.7%)
  • All the Other sectors which have been left out from the above can be considered as relative blackholes especially in times like COVID.
Considering all these factors and excluding Ownership of Dwellings (since it is a notional indicator), one can safely say that Agriculture, Trade and Mining, even though they may have limitations, are based on primary data or at least not based on formal sector/ corporate data. 
    
The rest of the sectors which contribute 20% of the GVA are tracked mostly using formal sector data. However, Manufacturing, Construction and Transport sectors, which contribute almost 13% of the overall GVA, can be tracked quite well using formal sector data.  

PS: It is generally believed that Non-Agricultural MSMEs contribute almost 30% to our GDP and has an employment of 11 crore people. While the first part is broadly true if we exclude the notional item called "Ownership of dwellings", the second part is based on the Informal Enterprises Survey of 2015-16. As discussed above, this survey did not  capture the Quasi corporates and does not include Construction sector and hence, the 11 crores employment would be a gross-underestimate. As per PLFS surveys and author's calculations, the employment in Non-Agri informal sector enterprises was around 18 crores in 2017-18 and increased further to 21 crores in 2020-21. This figure is almost double the number estimated by the Informal Enterprise surveys.  

Sources

S1: Changes in Methodology and Data Sources in the New Series of National Accounts https://mospi.gov.in/documents/213904/301563//Changes_in_Methodology_NS_2011-12_June_20151602083659578.pdf/a4712841-db73-d5ee-07ca-b09c86ee56ca

S2: Understanding the New Series of National Accounts - FAQs https://mospi.gov.in/documents/213904/301563//Understanding_New_GDP1602084681382.pdf/77d8d864-5141-b121-f8e1-9f60291c3703

S3: Measuring Informal Economy in India _ Indian Experience

https://www.imf.org/-/media/Files/Conferences/2019/7th-statistics-forum/session-ii-murthy.ashx#:~:text=By%20S%20V%20Ramana%20Murthy1,characteristics%20of%20the%20informal%20sector.

S4: Economic Characteristics of Unincorporated Non-Agricultural Enterprises (Excluding Construction) in India

https://mospi.gov.in/documents/213904/301563//NSS_report%20582_73rd_round_10aug181602939318914.pdf/e59e540f-e710-1153-b166-6fb43dfb84ea

S5: Operational Characteristics of Unincorporated Non-Agricultural Enterprises (Excluding Construction) in India

https://mospi.gov.in/documents/213904/301563//NSS_5811602602572803.pdf/d96ca3c2-36c7-10b8-3995-95787ee11de9

S6: National Accounts Statistics, 2022

https://mospi.gov.in/web/mospi/reports-publications/-/reports/view/templateFive/27503?q=RPCAT

S7: Motilal Oswal: Explaining the divergence between corporate performance and GDP data

https://www.motilaloswal.com/site/rreports/HTML/636058118538132127/index.htm

S8: Annual Survey of Industries, 2016

S9: https://timesofindia.indiatimes.com/business/india-business/in-10-charts-how-gst-has-evolved-in-last-5-years/articleshow/92659930.cms

S10: Indian Bureau of Mines, Cement Sector Report

https://ibm.gov.in/writereaddata/files/12102021174214Cement_2020.pdf

S11: Civil Registration System

https://censusindia.gov.in/nada/index.php/catalog/42542

S12: A Composite Coincident Index for Unorganised Sector Activity in India

https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/06ART20122022CD95B5E1D5C64B90852AE098460A7D31.PDF

S13: A Statistical Report on Completion of 5 years of GST

https://tutorial.gst.gov.in/offlineutilities/gst_statistics/5YearReport.pdf

S14: Chapter 2, Economic Survey 2017-18

https://www.blogger.com/blog/post/edit/5067054462693726365/4434796604375821404

S15: https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4344&#:~:text=The%20changes%20in%20economic%20activity,increase%20with%20the%20income%20growth.


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