A Pension Index for India

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Value of Notionally Secured Pensions Index

A Pensions Index for India

By V.N.Sreekaran Pillai

Synopsis

There is no literature on developing an index to measure the appropriateness and sufficiency of pensions paid in a country. However, there is one pension-index known as the Melbourne Mercer Global Pension Index, an analysis of which shows that it is complex, sophisticated and comprises of many factors that makes it less appealing. In India’s case some of its foundations are factually incomplete.

This Paper introduces three new concepts, viz.      

(i)      Per Capita Value of Notionally secured Pensions, that covers all defined benefit and defined contribution pensions in the country

(ii)      Modified Per Capita Income, i.e. per capita income from which pension income that is included in it  is removed and

(iii)         Population figure comprising of persons who are eligible to be contributors to and  recipients of pension (instead of mean population of the year)

and develops a Pension Index for India, which is the ratio of per capita value of notionally secured pensions to modified per capita income.

This paper has come up with a truly innovative concept that can make India the first country in the world to implement a Pension Index.

The ideal value of the Pension Index for India is 1, which means per capita value of notionally secured pension is equal to modified per capita income. In reality the Pension Index for India [for the year 2012-13] is 0.05, meaning thereby that for every rupee of pension to be paid we have made a provision of 5 paise only.

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email:pillaivnsreekaran@gmail.com

Group Mediclaim Insurance Cover to LIC employees

This policy provides for medical insurance cover to present and past employees, their spouses and dependent children. It provides for benefits by way of reimbursement of hospital expenses, domiciliary treatment expenses and cash-less treatment facility in case of specified illnesses.

Have you read the policy conditions? If not, please read them.

I give here two comments on the policy conditions:

1. Cash-less treatment facility is available for serious illnesses. It is not always that you require this facility when you are in your headquarters, where people know you and it will be easy to obtain a letter from LIC. You may need it when you are out of head quarters or when you are on travel. On all such occasions the Medical Identity Card issued by the TPA should come to your help. Interestingly no Identity Card is issued by the TPA to members of the scheme. I contacted the TPA recently as if I need cashless facility. I was asked the number of my Medical Identity Card issued by the TPA. When I reported that no card is issued to me by the TPA their customer service executive asked for my SR number to assist me. When I gave my SR number, after verifying from their system, he told me that no data pertaining to me is available in the system.  If this is the case with a person who has been a member of LIC's medical scheme since its inception in 1987, can you be sure that your details are available with them and in case of need you will get 'cashless treatment' facility? Please take up with your office and insist that Identity Cards should be issued to members covered by the medical insurance.

2. Exclusion clauses are incorporated in policies to protect the insurer from adverse situations. But the  clause 4.21 of our Medical insurance policy says "Medical expenses under two policy periods: If a claim spreads over two policy periods  the total benefits will not exceed the sum insured of that policy during which period the insured person was admitted to the hospital...." That means if you are admitted in the hospital on 25th March of a year (and it costs you Rs 1,50,000 for various investigations in the hospital in  March) and discharged on 30th April after a major surgery (it costs you another Rs 1,50,000 in April) the TPA / insurer will give you only Rs 2 lakhs - even though they have collected premium for both the years (e.g.2013-14 and 2014-15) and in each policy year you should get coverage for Rs 2 lakhs. Don't you think such clauses should go? If yes, please take up with LIC through proper channel.

Relevant information on the insurance:

Insurer: New India Assurance Company Ltd
TPA: M/S MEDI ASSIST INDIA PVT LTD
Toll free no. of TPA: 1800-4259-449
Tel.no. of TPA: 080 26537870

Please read the policy conditions. If you need a copy of the policy write to me from your email...vns pillai

GDP - Source materials used in computation of GDP from banking, insurance etc.

SOURCE MATERIAL USED  

Item:                            Sources of data

1. Commercial banks:  Annual Reports/Account.
2. Banking department of RBI: RBI Annual Report.
3. Public sector financial corporations:  Annual Reports.
4. Private non-banking financial companies,: RBI bulletins.
5. Post office savings banks: Budget documents of Department of Post
6. Co-operative credit societies: Statistical statements relating to co-operative movement in India, Vol. I Credit societies (NABARD) and data on income and expenditure of sample co-operative societies obtained directly.        
7. Life Insurance:                                          
i)   Annual Reports and Accounts (LIC);
 ii)  Annual Reports and Accounts of private life       insurance companies;
 iii)  Valuation Reports; and                   iv)  Appropriation Accounts: Postal Services.    
8. General Insurance: Annual Reports and Accounts.
9. Employees State Insurance Corporation Annual Reports:    Appendix 18.2
     
INDICATORS USED IN THE PREPARATIONOF CONSTANT PRICE ESTIMATES
 
 Item    Indicators
 1. Commercial banks,  Estimates of GVA at current prices are deflated by implicit GDP price deflator of commodity producing sectors.
2. Banking Department of RBI, Estimates of GVA at current prices are deflated by implicit GDP price deflator of commercial banks.
3. Post Office Savings bank CPI index.
4. Non- banking financial companies and corporations:Total net receipts deflated by WPI.
5. Co-operative credit societies Average of indices of deposits (deflated) and membership.
 6. Life insurance corporation Average of deflated indices of change in life fund and sum assured.
7. Postal life insurance Average deflated indices of life fund and sum assured.
8. Non-life insurance
Deflated index of premium net of claims and surrenders.
[Reproduced from National Accounts Statistics-Sources & Methods, 2007 CHAPTER 18]     

How Life Insurance is incorporated in the GDP?

GDP & Life Insurance


 Insurance: There are two types of insurance; life and non-life insurance. Life insurance is an activity whereby a policyholder makes regular payments to an insurer in return for which the insurer guarantees to provide the policyholder with an agreed sum, or an annuity, at a given date or earlier if the policyholder dies beforehand. Non-life insurance covers all other risks; accidents, sickness, fire etc. A policy that provides a benefit in the case of death within a given period but in no other circumstances, usually called term insurance, is regarded as non-life insurance because as with other non-life insurance, a claim is payable only if a specified contingency occurs and not otherwise.  

18.24 The output of insurance represents the value of the service provided by insurance corporations in arranging payments of claims and benefits in exchange for the receipts of premiums and contributions. Premiums are usually paid regularly, often at the start of an insurance period, whereas claims fall due later. In the mean time between the payment of premiums being made and the claim being receivable, the sum involved is at the disposal of the insurance corporation to invest and earn income from it. The income thus earned allows the insurance corporations to charge lower premiums than would be the case otherwise. This income comes from the investment of the technical reserves of the insurance corporations, which are assets of the policyholders, and does not include any income from the investment of the insurance corporations’ own funds. The technical reserves of an insurance corporation consist of pre-paid premiums, reserves against outstanding claims, actuarial reserves for life insurance and reserves for with-profit insurance. The output of the insurance activity, which represents the service provided to policyholders, is calculated separately for life and non-life insurance as:  Total actual premiums or contributions earned;  Plus total premium or contribution supplements;  Less claims or benefits due;  Less increases (plus decreases) in actuarial reserves and reserves for with- profit insurance.

18.25  Life insurance: The annual Report and Accounts published by the LIC give necessary details for preparation of the estimates of GVA.   In respect of private life insurance companies, data is available in their annual accounts and these are collected and analysed in the CSO.  

18.26 The GVA by the life insurance business conducted by the Department of Posts is estimated by analysing the 'Appropriation Accounts' brought out by the same department.  Profits and dividends are assumed to be nil. [From National Accounts Statistics - Sources and Methods, 2007, Chapter 18]

Gross Domestic Product etc - 36

Broad compilation procedures

3.19 The general methodology for compiling the estimates of state income
is to first compile the estimates at disaggregated level for each economic
activity and then aggregating them for the whole region/state. The estimates
for commodity producing sectors like agriculture, forestry, fishing, mining &
quarrying, manufacturing, etc. are prepared using the production approach
i.e. measuring the value of output and deducting there from the cost of
material inputs used in the process of production. In the services sectors
(non-public segment) like trade, transport, hotels & restaurants etc., the
estimates are prepared by income approach, specifically, by multiplying the
value added per worker by the number of workers, for the benchmark
estimates and extrapolating these benchmark estimates with suitable
indicators for the annual estimates. The information on value added per
worker is obtained from the relevant Enterprise Surveys conducted for the
purpose. The estimates of workforce are obtained using the results of largescale
sample surveys on employment & unemployment conducted by
National Sample Survey Organisation (NSSO) and decennial population
census carried out in the country by the Office of Registrar General of India
(RGI) and Census Commissioner. In the case of DDP, the estimates for
commodity producing sectors and for public sector, are generally compiled on
the basis of data available at district level. For other private sector segments,
the workforce data is used to allocate state level estimates across the
districts.
3.20 In the preparation of state income estimates, certain activities cut
across state boundaries, and thus their economic contribution cannot be
assigned to any one state directly. Such activities are Railways,
Communications, Banking & Insurance and Central Government
Administration, and are known as the Supra-regional sectors of the economy.
The estimates for these supra regional activities are compiled for the
economy as a whole and allocated to the states on the basis of relevant
indicators. In the case of railways, the indicators are based on the track
length and passenger/goods carried where as in other supra regional sectors
it is the number of employees posted/allocated in the state. Certain activities
like, defence, para military, border security force, high seas drilling etc. are
still kept outside the purview of the state income estimation.

3.21 The estimates of CFC are compiled at the national level using the
estimates of asset wise Net Fixed Capital Stock (NFCS) and average life of
asset, following the procedure of perpetual inventory method (PIM). The
national level estimates of CFC are allocated to states using appropriate
indicators. For example, in the case of agriculture sector, the indicators of (i)
public part, (ii) plantation and (iii) private part are the (a) capital assets and
capital outlay of irrigation departments, (b) area under crops and (c) fixed
assets of cultivator households (from AIDIS), respectively. In the case of
forestry and logging, fishing, mining & quarrying, and construction sectors,
the indicators are the respective sectors’ estimates of GSDP. For electricity,
gas & water supply sector, the indicator is the fixed assets, and for trade,
transport by other means and other services, the indicators are the state-wise
fixed assets of respective services, as available from NSS 57th Round
survey. For the manufacturing (registered) and manufacturing (unregistered)
sectors, the indicators are state-wise fixed assets data available from the ASI
and NSS 56th Round survey, respectively.[Reproduced from CSO Publication]

Gross Domestic Product etc - 35

Per Capita Income

Per Capita State Income is obtained by dividing the NSDP (State Income) by
mid-year projected population of the state and is in contrast to the Per Capita
National Income which is obtained by dividing the Net national Product (NNP)
by the mid-year population of the country. Thus compilation of Per Capita
State Income is based on income originating approach whereas compilation
of Per Capita National Income is based on income accruing approach.
Similarly the per capita district income is obtained by dividing the NDDP
(District Income) by mid-year projected population of the district.
[Reproduced from CSO Publication]

Gross Domestic Product etc - 34

Current vis-à-vis Constant Prices

3.17 The income regardless of the concept used is obviously measured at
prices prevailing during the year or in other words at current prices. When
calculated over a number of years the changes in national income would,
therefore, include implicitly not only the effect of the changes in production
but also the changes in prices. This estimate compared over the period
would not, therefore, give a proper measure of the overall increase, in real
terms, in production of the country or the economic welfare of the people or
growth of the economy. Therefore, it would be necessary to eliminate the
effect of prices, or in other words to recompile the whole series at given
prices of one particular base year. The income thus computed is termed as
‘income/product/expenditure at constant prices’ or in real term.

3.18 The income in real terms provides a measure of the growth of the
economy. When available by industry of origin, these estimates give a
measure of the structural changes in the pattern of production in the state
which is vital for a proper economic analysis and planning. The distribution of
state income by factor shares measure the changes in the shares of either
labour or capital or individuals partly owning capital and partly contributing
labour. This reflects not only the variations in the productivity of these groups
but also changes in their respective ownership position. Finally, at the point
of utilisation the changes in the shares of either consumption expenditure by
individuals and households or capital formation in the public and private
sectors give an idea of the economic welfare of the people and changes
therein as well as the extent by which the capital assets of the state are either
increasing or decreasing.[Reproduced   from CSO Publication]

Gross Domestic Product etc - 33

Factor Cost and Market Prices

3.16 Production and the income method measures domestic product at the
cost paid to the factor of production and is known as domestic product at
factor cost. However, at the point of expenditure, the value of the product is
normally at market prices i.e. at the actual prices which either the consumers
or the producers pay for purchase of goods and services, whether for
consumption or for capital formation. This measurement of domestic product
through the expenditure side is known as domestic product at market prices.
This market value of the final expenditure would exceed the total obtained at
factor cost by the amount of indirect taxes levied by the Government less the
value of subsidies given by the Government to producers. The domestic
product can, therefore, be measured either at factor cost or at market prices,
one differing from the other by the amount of net indirect taxes (i.e. indirect
taxes less subsidies). However, the State DESs are presently measuring the
SDP and DDP only at factor cost, in the absence of compilation of SDP/DDP
by the expenditure method.[Reproduced from CSO Publication]

Gross Domestic Product etc - 32

Gross/Net Value Added

3.14 A few other points also need to be taken into account while estimating
the state product at factor cost. Firstly, capital is one of the primary factors
used in production and it results in the consumption of fixed capital in the
process of production and hence as reduction in the economic life of the
capital, or in other words the capital depreciates as a result of its use in the
process of production. The estimates of value added without any
adjustments for the capital depreciation/consumption referred to above is
termed as gross value added. If an adjustment is made for capital
depreciation/consumption the estimate of net value added is obtained. The
estimation of depreciation provision or the amount of inputs of capital in the
form of consumption of capital in the process of production is complicated as
the value of assets may get depleted fast due to technological changes and
also because the quantity of stock of assets changes every year. The
general practice is to estimate depreciation or consumption of fixed capital
during a year on a straight-line basis (known as perpetual inventory method
(PIM)) with reference to the expected economic life of different types of fixed
capital. This method is followed at national level.
3.15 However, the PIM procedure for estimating CFC is not possible at
state level or district level, due to the non-availability of data on capital stock
in the state/district. Therefore, the CSO estimates the CFC at state level
using various proxy indictors and provides them to the State DESs. The
State DESs on their part allocate the state level CFC estimates to the District
on the basis of domestic product estimates.[Reproduced from CSO Publication]

Gross Domestic Product etc - 31

Expenditure Method

3.11 The household consumption expenditure consists of expenditure by
the households (including non-profit institutions) on non-durable consumer
goods and services and all durable goods excepting land and building. The
coverage of the government consumption expenditure is the same except for
the fact that by convention, expenditure on durable goods which are used in
defence are also treated as part of consumption expenditure of the
government. The fixed capital formation consists of expenditure on the
acquisition of capital goods in the form of building, machinery and equipment,
transport equipment, etc. The stock accumulation is in the form of changes in
stock of raw materials, finished and semi-finished goods held by the
producing units including the government during the year. The two items
together i.e. fixed capital formation and change in stocks are termed Gross
Capital Formation. It will be noticed that all durable goods purchased by the
households other than land and buildings are considered as their
consumption expenditure but the expenditure on land and buildings is treated
as capital expenditure. Thus the motor vehicles purchased by households
(individual) are treated as consumption expenditure while the same if
purchased by the enterprises is treated as fixed capital formation.

3.12 The state and district income estimated by any of the above three
methods should in principle yield the same results.

3.13 However, given the data availability position, it is not possible to
compile SDP/DDP estimates by all the three approaches. The States follow a
combination of production and income approaches to compile the SDP/DDP
estimates. No attempt is made to compile the SDP/DDP estimates by
expenditure approach.[Reproduced from CSO Publication]

Gross Domestic Product etc - 30

Expenditure Method

3.10 The income available to the individuals in the form of labour income or
capital income or the income retained by the productive units is then spent.
This utilisation of the income can take various forms viz. (a) household
consumption expenditure, (b) government consumption expenditure, (c) fixed
capital formation, (d) stock accumulation and (e) net exports. Thus the third
alternative of measurement of income or value added is obtained through the
items of expenditure enumerated above. This method is known as
Expenditure Method.[Reproduced from CSO Publication]

Gross Domestic Product etc - 29

Methods of estimating income (contd.)

3.9 The net value added available for each unit of production is equal to
the amount of total income generated by the unit in the process of production.
This income is distributed between the two primary factor inputs, viz., capital
and labour. In other words the income is distributed in the form of either
capital income (return on capital) to the owner of capital or labour income
(wages etc.) to the labour employed or as mixed income to individuals who
are partly owners of capital and partly work as self employed labour for
production in their own enterprises. Some income is also retained by the
producers for further investment and some are set aside for payment either
later or in a different form. Examples of the later are employer’s contribution
to social security, pension and other welfare funds and pension payments
while the former is the income retained by the producers as undistributed
profit to be used for increasing the capital assets. The labour income takes
the form of either wages or salaries (including commission, bonus, etc.) or
supplementary contribution of the employers or payments in kind. The
distributed capital income on the other hand, is mainly in the form of
dividends, interest on bonds, mortgages etc., and rent on land. The capital
incomes other than profit retained by enterprises are distributed to the owners
of capital who are either individuals or enterprises in the form of dividends.
The mixed income generally accrues to the self-employed people who
employ their own capital and labour for production. This income consists
partly of profits of the un-incorporated enterprises and partly of labour income
of self-employed (in cash or in kind) and is retained by owners in exchange of
services rendered. Thus, the total income generated in the form of factor
shares consists of (i) wages and salaries etc., (ii) interest, (iii) rent, (iv)
dividends, (v) undistributed profits and (vi) mixed income of self employed.
This method of measurement of income is known as Income Method or
Income generation method.[Reproduced from CSO Publication]

Gross Domestic Product etc - 28

Methods of estimating income (contd.)

3.8 For measurement of income at the point of production (measuring
income by production method), it is important to remember that the value
added by production is to be counted without duplication, i.e. not the total
value of commodities and services produced over a given period of time but
only the value of the final products excluding the value of inputs of all raw
materials and services used in the process of production. At the same time,
the coverage of the outputs should be comprehensive enough to include all
commodities and services even to the extent of including imputed values of
products for own consumption or the imputed rent of owner occupied houses
or the services produced with paid domestic servants for own final
consumption. The method to be followed for the purpose is to divide the
economy into a given set of industrial sectors and to estimate the total value
of inputs of raw materials and services used for production and then estimate
the value added by the sector as the total value of output minus the value of
inputs of raw materials and services (intermediate consumption). The price to
be used for evaluating production is the price received by the producer or
price paid at the first point of transaction. Thus, for example, for agricultural
products those are the prices received by the producers at the first point of
transaction i.e. primary market, and for industrial products it refers to the
prices received by the producing units at the factory site through sale of the
commodities produced. The estimate of product of a state over a given
period of time is thus the sum of total of value added (value of output minus
value of inputs of raw materials and services) for all industrial sectors of the
economy. In the case of services, the value added is measured in terms of
the total amount of money paid in return for the services received minus the
cost of inputs in the form of items like transport, advertisement, bank charges,
etc. The state income thus estimated is termed as ‘state domestic product at
factor cost’. This method of measurement of state income (or value added) is
termed as Production Method. Similar is the concept in the case of district
domestic product at factor cost.[Reproduced from CSO Publication]

Gross Domestic Product etc - 27

Methods of estimating income

3.7 There are three methods used in the measurement of income. The first
known as production (or value added) method based on the value that has
been added in the process of production. The second known as income
method also arises from the first in that the production process generates
income, which is paid to the factors of production. Again, the production
within the economy for a given period of time is meant either for the
consumption within the economy or for the addition to the existing stock of
goods or for exports to the rest of the world. This provides us with a third
method of measurement of income known as expenditure method. Thus the
three methods of estimation of income are circular in nature in the sense that
it begins at the production process where the productive units engage
labourers and capital and produce goods and services, the total measure of
which gives the state product. This production process generates a given
amount of money income, which is distributed by the productive units to the
factors of production, or in other words, the state income by factor shares.
The income thus received by the factors of production is then spent either by
the labour in their capacity as households in terms of acquisition and
consumption of goods and services, or by the producers in acquiring more
capital and increasing the physical assets of their productive units. The
income by definition is same whether measured at the point of production or
at the point of income generation or at the point of final utilisation. The
income can thus be measured through any one of the alternative methods but
if a complete analysis of the economy is the objective, then it should be
measured by all the three different methods simultaneously and compared.
[Reproduced from CSO Publication]

Gross Domestic Product etc - 26

Income accruing approach

3.6 The income accruing approach relates to the income accruing to the
normal residents of a state. In other words, it is the income received by the
residents of a region, even though some of it might have accrued outside the
region. Since this measures the income that becomes available to the
residents of a state, it provides a better measure of the welfare of the
residents of the region. However, for compiling the State Domestic Product
(SDP) estimates by income accruing approach one needs data on flows of
factor incomes to/from the boundaries of state i.e. on inter-state flows as well
as flows to/from abroad. But in an open economy like that of a state in this
country, it is very doubtful whether such an estimate can be prepared unless
special effort is made for the collection of this data.[Reproduced from CSO Publication]

Gross Domestic Product etc - 25

Concepts and Definitions

3.4 The estimates of State Income can conceptually be prepared by
adopting two approaches, namely, income originating and income accruing.
Income originating approach

3.5 In the Income originating approach, the measurement corresponds to
income originating to the factors of production physically located within the
geographical boundaries of state and represents net value of goods and
services produced within the state. It is the income originating as a result of
the utilization of the physical assets and the labour force in the region, even
though some of the income might flow to residents outside the region. The
State DESs presently compile estimates of SDP/DDP following the income
originating approach, due to lack of requisite data needed for compiling these
estimates by following the income accruing approach. Thus the current
concept of compiling the GSDP/NSDP is similar to that of compiling the
GDP/NDP of the entire economy i.e., measuring the volume in monetary
terms, the total value of goods and services produced within the geographical
boundary of the state.[Reproduced from CSO Publication]

Gross Domestic Product etc - 24

CONCEPTS AND DEFINITIONS OF
STATE AND DISTRICT DOMESTIC PRODUCT

Introduction

3.1 The state accounts statistics are an extension of the system of national
accounts to the regional level. These comprise various accounts indicating
the flows of all transactions within a time period between the economic
agents constituting the state economy and their stocks. They include items
like total output of the economy, the intermediate expenditure, state domestic
product, factor incomes, consumption expenditure, capital formation, capital
stocks, consumption of fixed capital, etc. The most important aggregate of the
state accounts is the state domestic product (SDP). At district level, the
maximum that the State DESs can compile at present, given the data
availability position, is the district domestic product (DDP).

3.2 State Income (Net State Domestic Product/NSDP) and District Income
(Net District Domestic Product/NDDP) is defined in exactly the similar manner
as the net domestic product for the country, i.e. it is equal to the income
generated by the production of goods and services within the geographical
boundaries of a State or a district, as the case may be. This is arrived at by
netting the gross state/district domestic product estimates (GSDP/GDDP) by
the consumption of fixed capital (CFC).

3.3 The SDP/DDP at factor cost is regarded as the most important single
economic indicator to measure the growth and pattern of economic
development of a state or a district. The per capita NSDP and the per capita
NDDP, respectively represent the welfare and level of living of the normal
residents of a state and district. These measures also provide an idea of
regional disparities. The indicators like per capita state income are now
frequently used by the Planning Commission (PC) and Finance Commission
(FC) for devolution of a part of plan resources and distribution of proceeds
central taxes to different states.[Reproduced from CSO Publication]

Concepts and Definitions, in the next post

Gross Domestic Product etc - 23

Expenditure Approach GDP
(continued fom previous post)

Gross and net concept

2.45 Gross domestic product (GDP) at market prices represents the final
result of the production activity of resident producer units.
2.46 GDP is also equal to the sum of the final uses of goods and services
(all uses except intermediate consumption) measured in purchasers' prices,
less the value of imports of goods and services.
2.47 Finally, GDP is also equal to the sum of primary incomes distributed by
resident producer units.
2.48 Net domestic product (NDP) is obtained by deducting the consumption
of fixed capital from GDP.[Reproduced fromCSO Publication]

Gross Domestic Product etc - 22

Expenditure approach GDP
(continued from previous post)

Volume measures

2.44 The SNA emphasizes calculation at constant prices, that is, use of the
system(s) of prices which prevailed in a past period(s). The changes over
time in the current values of flows of goods and services and of many kinds of
assets can be decomposed into changes in the prices of these goods and
services or assets and changes in their volumes. Flows or stocks at constant
prices take into account the changes in the price of each item covered. They
are said to be in volume terms. However, many flows or stocks do not have
price and quantity dimensions of their own. Their current values may be
deflated by taking into account the change in the prices of some relevant
basket of goods and services. [Reproduced from CSO Publication]
[To be concluded]

Gross Domestic Product etc - 21

Expenditure approach GDP
(continued from previous post)

2.42 Gross capital formation is measured by the total value of the gross
fixed capital formation, changes in inventories and acquisitions less disposals
of valuables. Gross fixed capital formation is measured by the total value of a
producer's acquisitions, less disposals, of fixed assets during the accounting
period plus certain additions to the value of non-produced assets realised by
the productive activity of institutional units. Fixed assets are tangible or
intangible assets produced as outputs from processes of production that are
themselves used repeatedly or continuously in other processes of production
for more than one year. There is substantial diversity in the different types of
gross fixed capital formation that may take place. The following main types
may be distinguished:
(a) Acquisitions, less disposals, of new or existing tangible fixed assets,
subdivided by type of asset into:
(i) Dwellings;
(ii) Other buildings (c) Major improvements to tangible non-produced assets, including
land;
(d) Costs associated with the transfers of ownership of non-produced
assets.
2.43 Given the general explanations of the previous section, the main
identities connecting the aggregates of the SNA 1993 are summarized in this
section: GDP at market prices is defined from the expenditure side as:
Household final consumption expenditure + NPI final consumption
expenditure + Government final consumption expenditure + Gross
fixed capital formation + Acquisition less disposals of valuables +
Changes in inventories + Exports (f.o.b.) – Imports (f.o.b.)and structures;
(iii) Machinery and equipment;
(iv) Cultivated assets - trees and livestock that are used
repeatedly or continuously to produce products such as fruit,
rubber, milk, etc.
(b) Acquisitions, less disposals, of new and existing intangible fixed
assets, sub-divided by type of asset into:
(i) Mineral exploration;
(ii) Computer software;
(iii) Entertainment, literary or artistic originals;
(iv) Other intangible fixed assets;
[Reproduced from CSO Publication][To be concluded]