An examination of relationship between fisim and gva of financial intermediaries at national and sub-national level

Synopsis: Financial Intermediation Services Indirectly Measured (FISIM) is the main component of output of financial intermediaries (FIs). After deducting the operating expenses of FIs, the remaining becomes the Gross Value Added (GVA) of FIs. The FISIM is consumed by the non-financial industries as intermediate consumption (IC) and by the households as financial consumption. Thus, the GVA of FIs and the FISIM as IC for non-financial industries are strongly correlated. In India, although the GVA of financial intermediaries are computed at the central level for both the national as well as State level, FISIM as IC is computed separately by the CSO and the respective DES using somewhat different methodologies. Here, the authors have first made an attempt to compute the FISIM as IC estimated by the States/UTs, which is not published by them, but which can be computed using their published industry-wise GVA and the methodology which they are supposed to follow to estimate industry-wise FISIM as IC for their State/UT. Then the authors have compared this FISIM at State/UT level with the all-India FISIM as IC published by the CSO and subsequently, the FISIM as IC for each State/UT with the GVA of FIs at State/UT level. The all-India ratio of FISIM as IC with GVA of FIs and the same for each State/UT for 3 consecutive years have also been compared after that. Finally, the authors have suggested some alternatives of computing FISIM as IC at the State/UT level to reduce the apparent inconsistencies.