Estimation of output of financial services: Some issues

Share of the ‘Financial services’ sector has grown at a much faster rate than other sectors during the recent years in the Indian economy and has increased from 1.1 per cent in 1950–1951 to 6.1 per cent in 2014–2015. This paper proposes to discuss the conceptual issues relating to the measurement of output of financial services as per the latest international standard, the 2008 System of National Accounts (SNA). Implementation of the recommendations of 2008 SNA in the Indian National Accounts is discussed inter-alia. Financial services that function with their own funds were not recognised in 1993 SNA but are now recognised in 2008 SNA by redefining the Financial Intermediation Services Indrectly Measued (FISIM). Beside corporate sector, certain unorganised/informal sector financial activities that function with their own funds like money lenders have significant presence in India and most developing countries in Asia and Africa; thus, their contribution needs to be incorporated in the output of total financial services. Improved methodology using new databases for estimating unorganised activities is now adopted in Indian national accounts.