An Improvement to Labour Input Method: The Case of Health Care Service

To understand the economic development and the sustainability of economic growth of a country, it is inevitable to know the actual output generated in the economy in terms of goods and services produced. In India, GDP is estimated as the sum of total production of three sectors — public sector, private organised sector and unorganised sector. For the unorganised non-agriculture segment, consisting of unorganised manufacturing and services, GDP is generally estimated through the Labour Input Method (LIM) as the gross value added by the labour input involved in the production process. LIM considers that the value addition of each worker in a particular state segregated by rural and urban areas, is the same. This implies that all the workers at state/rural/urban levels possess the equal level of productivity irrespective of the skill and occupational heterogeneity, which is unrealistic. The present study is an endeavor to overcome the drawbacks of the existing LIM by giving proper weight to the labour input according to their productive efficiency. To make a comparative assessment between the existing approach and the prescribed format of LIM an empirical application has been made for the case of health care service sector in India.