National accounts statistics and service price index

This paper presents in brief the sources and methods adopted in the compilation of national accounts statistics by the Central Statistical Organisation, and the availability of price indexes in terms of Implicit Price Deflators (IPDs) from the annual national accounts statistics for a number of macro-economic aggregates. The procedures adopted for estimating value added and other aggregates at current and constant prices, not only include (sometimes at detailed item level) almost all the CPIs, WPI, construction price indices and Unit Value Indexes of Imports and Exports, but also various other methods wherever data on production and prices of identifiable commodities that represent economic activities are available. Thus, IPDs provide a measure of price movements in the country. The main advantages of the IPDs are that they represent and combine a wide range of goods and services in the economy; and much more than those covered in the CPIs or PPIs. The IPDs, however, cannot be a substitute for a service price index, firstly because of the differences in the concepts of the two, and secondly, for many services, the deflators used in national accounts continue to be the CPIs and the WPI. As such, the absence of a detailed service price index is a major data gap in the compilation of national accounts. For constructing a service price index, the weights can be built up from the national accounts statistics. However, the major challenges are in (i) identifying representative commodities and specifications for various services, (ii) identifying willing businesses, who would furnish price information everymonth or quarter, and (iii) choice on the number of quotations, which should be determined on the basis of quality requirements.