City Level Income Estimation
City Level Income Estimation
(Revised on 03-January-2019)
1. Background
The relative affluence and standard of living of people in different cities are
often measured in terms of city level per-capita income of respective cities.
However, there is no standard methodology for estimating city level
income and no attempt has ever been made in India to get such
measures. It has, thus, been decided to attempt to estimate city level
income on a pilot basis for a few selected cities with a view to evolve a
methodology for extending it to other major cities in the country.
(i) Examine data sets available at the national, state and city
level which can be used for the estimation of city level income;
Since the city level income estimation is required to assess relative affluence
and standard of living of the city dwellers, income-accruing method is more
appropriate rather than income generation approach. In other words, the
income accruing to the residents of the city has to be estimated
irrespective of their place of economic activity.
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4. Estimation of Gross State Domestic Product (GSDP)
Estimates of Gross Domestic Product (GSDP) are being compiled by all the
States regularly on an annual basis by aggregating the contribution of
different industry groups. For this purpose, individual economic activities are
grouped into a number of compilation categories (See, Annex 1) on the
basis of nature of economic activity and data availability. Both the Central
Statistical Office (CSO) at all India level and the Directorates of Economics
& Statistics (DES) at the state level use the same compilation categories for
estimation to ensure consistency and comparability.
CSO and the DES use a mix of production, income and expenditure
methods for the estimation of sectoral contribution of GDP depending on
the nature of economic activity.1 State Governments also use the estimates
provided by CSO for certain sectors following apportioning methods. For
example estimates for rail and air transport, computer related services,
storage, residual category of construction etc are provided by CSO to the
state.
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Sl No. Name of States Latest year of Data availability
1 Himachal Pradesh, Punjab, Andhra 2015-16
Pradesh, Telangana, Maharashtra,
Tamil Nadu
2 Uttarakhand, Rajasthan 2016-17
Note: a. Availability is checked from the respective states DES portal; b. For several other states,
no district GDP data is available in the DES portal; c. All total 16 states report District GDP data
out of which 7 states have produced data at 2011-12 price and 9 have reported the data in
2004-05 price.
Therefore, using district GDP data to arrive at city GDP estimates may not
be possible. Instead, GSDP estimates prepared by the respective State
Governments will be the starting point for the estimation of city level
income. These, estimates need to be apportioned to each city by using
appropriate indicators. While District GDP estimates would have been an
ideal starting point, we would not be able to use that due to the following
reasons:
1. Non-availability of data for the latest year for all the states;
2. Non-availability of data for each of the states;
3. Use of old price series data by the states;
The simplest method of estimating the city level income is to multiply the
average per-capita income derived from the GSDP with the population of
the city. The method assumes that average per-capita income and
economic activities are uniform across all the cities in a State. For example
– between city A and B there will be no difference in city income if the size
of population remains same even if they have unique and distinctive
economic structure. That makes the method unsuitable for real life
application.
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A third approach is to apportion the sector-wise GSDP estimates based on
the number of workers in each sector in a city. It is a better method
provided we have reliable estimates of sector-wise GSDP as well as worker
estimates. It also assumes identical labour productivity across the State for
a particular sector.
The fourth approach is to apportion the GSDP by using other indicators like
business volumes of banks, GST collections, Direct Tax collections etc in the
State and in respective cities, provided such data are available at city level
with periodic interval. Moreover, it would not be very straightforward to
derive city GDP from such proxy indicators.
Second, this method would take into account the size of the enterprises as
we are using workers as a proxy for size of economic activities.
There can be criticism that – some cities may have better production
method so that with the same number of workforce a particular city can
produce more output than another one. Does this method capture such
productivity differential? The answer is ‘No’. Spatial productivity differentials
between two cities would not be captured through this method.
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There is one important point to remember that our method would produce
an approximate value of City GDP. It may not give the exact value of city
GDP that is largely a misnomer even in the context of country level GDP. A
lot many approximations is done even at the country level.
The other challenge, which this study poses, is data. While by taking the
state level GSDP for apportioning, we are avoiding aggregate error, there
can be error at micro level if the city is experiencing superlative growth
transformation. For example – we will be using NSSO data to find out worker
share in each industry. As on today (December 2018), latest round of NSSO
employment and unemployment survey data, which is available for public,
is for the year 2011-12. If we apply the WPR (worker population ratio) of
2011-12 to 2017 city population, the relative sectoral workforce share will
remain constant from 2011 to 2017. If the city has experienced a major
structural transformation in these years, the labour input estimate can be
imprecise estimate.
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7. Our Approach in Steps
Step-
1 1. Gross State Domestic
Product
Step- 7. Per capita worker GSDP Per worker Urban GSDP for 8. Per capital worker GSDP
4 each compilation group
Step-6
11. City GDP
The starting point of the analysis would be to obtain State-wise GSDP data
with break-up by compilation category. The estimates for each of the
compilation category by organized/Un-organized or
Corporate/Unincorporated sectors have to be collected from the
respective state DES. The compilation category is a group of industrial
classifications based on National Industrial Classification (NIC). These
compilation categories are used by CSO and state DES while estimating
GDP. The detail list of compilation category is available in Annex 1. While
the data at aggregate level is available in public domain, the
disaggregated data as per compilation categories of CSO is not available
for the states in public. Such information shall be collected from respective
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DES to be facilitated by MH&HA (henceforth Ministry). It is noted in the
recent releases of state government GSDP figures that – most of the states
have stopped reporting the break-up of Manufacturing GSDP data into
registered and un-registered category. Therefore, such data need to be
procured from the respective state level DES offices.
The next step is to estimate the labour input (i.e., number of workers in each
sector) in each of the above sectors separately for rural-unorganized, rural-
organized, urban-unorganized and urban-organized in the State. Here, the
term labour input means the number of jobs in each compilation category
classified into organized and un-organized separately for rural and urban
areas.
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then into Urban and Rural and subsequently to Organized-Urban and
Unorganized-Urban.
There are certain sub-steps we will follow to arrive at city GDP as discussed
below:
Again, we have to divide the data into rural and urban sectors. For this, we
have to take into account sector-wise employment share and productivity
differential between rural and urban areas.
We shall compute an index for rural-urban split by using labour input derived
from Employment-Unemployment Survey of 2011-12 and value added per
worker estimate from the survey of un-incorporated enterprise survey of
2010-11.2
We will take the worker size class criteria to split the industries into organized
and unorganized given in the unincorporated enterprise survey data set.
Enterprises having 10 and more workers shall be considered as organised
sector and enterprises having less than 10 workers shall be considered as
un-organised. It is assumed that the enterprises having more than ten
workers will have similar productivity levels as those of corporate sector. This
is confirmed by the exercises done by the erstwhile National Commission
for Enterprises in the Un-Organised sector (NCEUS).
Splitting it into rural and urban sector: Unincorporated enterprise survey of 2010-
11 (67th round of NSSO) data set also provides the break-up of rural and urban
2Unincorporated enterprise survey of 2010-11 (67th round of NSSO) covers manufacturing and
services excluding construction. In manufacturing, it covers non-ASI sector. It also has not
covered govt. sector in enterprise type.
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sector. Therefore, enterprises in the organized and unorganized sector shall be
divided into rural and urban in each compilation category.
Urban Rural
Organized Per worker GVA for Per worker GVA for
Urban-Organized [UO] Rural-Organized [RO]
Unorganized Per worker GVA for Per worker GVA for
Urban-Unorganized Rural Unorganized [RU]
[UU]
The next step is to estimate the total value addition by each of the above
segments. It will be done by multiplying the average value added per
worker with the labour input (i.e., workforce). NSSO 68th round provides the
latest data on workers across sectors. We will multiply the coefficient that is
obtained in Table 2 with the sectoral employment figures of NSSO 68th round
for obtaining aggregate sectoral GVA across the four quadrants in each
compilation category.
Therefore, the relevant output from sub-step 2 is: Urban GSDP by economic
activity for organized and unorganized sector.
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Also, the following industry groups were not covered by the NSSO survey on
Un-incorporated Non-agriculture Enterprises.
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Sub-step 4 [City Workforce]: In the preceding step, we have calculated
state level workforce per sector for urban area. That is required to arrive at
per worker GDP for a sector in urban area, which would be used to arrive
at city GDP by multiplying it with city work force.
Now how to obtain city work force?
NSSO employment and unemployment survey data provides information
up to million plus cities. There is a separate stratum allocated to such cities.
Using the method discussed in sub-step 3, we can arrive at city workforce
for organized and unorganized sector separately for each industry group.
However, there is a challenge.
In NSSO data, one can get good representation of data up to region level.
Regions consists of sum of few districts in a state. Below region, the sample
size become very thin. Therefore, any projection with such a thin sample
poses challenge. For example – there are only 400 sample workers
distributed across various sectors in Hyderabad. As we know, NSSO is an All-
India survey therefore such coverage is not unusual.
Question now arises – how to augment this sample size? One plausible way
is to pool NSSO unit level data of centre sample and state sample. DES
collects state sample. However, such data is not made publicly available.
It has to be obtained from DES for which Ministry’s support would be
required. Once we have a pooled sample, that sample can be used to
obtain city workforce for the year 2011-12. Using city WPR and city
projected population of 2017-18, we will get the city workforce for 2017-18.
Sub-step 5 [Calculating per worker GSDP at State level]: In sub-step 2, we
have arrived at Urban GSDP by sector. In sub-step 3, we have arrived at
urban workforce of the state by the sector. Dividing urban GSDP of the
sector with urban workforce of the state by sector would give us per worker
GSDP at the State level.
Sub-step 6 [Calculating City GDP]: To arrive at City GDP, we need to
multiply the city workforce per sector (obtained in sub-step 4) with per
worker GDP for each sector at the state level obtained in sub-step.
Step 3: Bringing in spatial efficiency factor
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and rural - urban sectors will be captured. To come over this challenge, we
may attempt an adjustment factor as discussed in the following
paragraphs.
Step A: We will use all India data and calculate the Total factor productivity
(either by adopting index method or regression based method). Let us call
it Aggregate Efficiency Value (AEV). We will use only Labour and Capital as
input and GVA as output for Industry and services.
Step B: Then we will distribute AEV by elements of PDI. We will distribute the
PDI score across NIC 2 digit industries over Enterprises type, Ownership type
and by Size class. Each cell would provide an average value of AEV.
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classification per city. From step B, we would have obtained the PDI values
for each combination. We will apply that efficiency-augmenting factor to
the city GDP to take into account productivity differentials.
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Annexures
Annex 1: Compilation categories adopted by CSO in the new series (2011-12) and their
concordance with NIC 2008
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Sl. No. Compilation Category NIC 2008
3.5.2. Manufacture of paper and paper products 17
3.5.3. Printing and reproduction of recorded media except publishing 18
3.5.4. Manufacture of coke and refined petroleum products 19
3.5.5. Manufacture of chemical and chemical products except 20
pharmaceuticals, medicinal and botanical products
3.5.6. Manufacture of pharmaceutical; medicinal chemicals and botanical 21
products
3.5.7. Manufacture of rubber & plastic products 22
3.5.8. Manufacture of other non-metallic mineral products 23
3.5.9. Manufacture of furniture 31
3.5.10. Other Manufacturing 32
3.5.11. Repair and installation of machinery and equipment 33
4. Electricity, gas, water supply and other utility services
4.1. Electricity 351
4.2. Gas – Manufacture & distribution 352+353
4.3. Water Supply 36
4.4. Sewerage, waste management and remediation activities 37,38,39
5. Construction 41,42,43
6. Trade, repair, hotels & restaurants
6.1. Trade & repair services
6.1.1. Trade and repair of motor vehicles (including motor cycles) and retail 45+473
sale of automotive fuel
6.1.2. Wholesale trade except of motor vehicles and motor cycles + 46+92001
Wholesale of lottery tickets
6.1.3. Retail trade except of motor vehicles and motor cycles + retail sale of 47-473+92002
lottery tickets
6.1.4. Repair of computers and personal and household goods 95
6.2. Hotels & Restaurants 55, 56
7. Transport, storage, communication & services related to broadcasting
7.1. Transport
7.1.1. Transport via Railways 491
7.1.2. Road transport 492
7.1.2.1. Mechanized Road Transport 492-49226-
49232
7.1.2.2. Non-mechanized Road Transport 49226+49232
7.1.3. Water Transport 50
7.1.4. Air Transport 51
7.1.5. Services incidental to transport 522
7.2. Storage 521
7.3. Communication & services related to broadcasting
7.3.1. Postal activities 531
7.3.2. Courier activities 532
7.3.3. Activities of cable operators 61103
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Sl. No. Compilation Category NIC 2008
7.3.4. Telecommunication 61-61103
7.3.5. Recording, Publishing and Broadcasting services 58,59,60
8. Financial Services 64,65,66
9. Real estate, ownership of dwellings and professional services
9.1. Real estate and ownership of dwellings 68
9.1.1. Real Estate activities 68 – 681 (p)
9.1.2. Ownership of dwellings 681 (p)
9.2. Professional services
9.2.1. Computer and information related services 62,63
9.2.2. Professional, scientific and technical activities (including R&D) 70 to 75
9.2.3. Administrative & support service activities and other professional
activities
9.2.3.1. Legal activities 691
9.2.3.2. Accounting & book keeping activities 692
9.2.3.3. Rental and leasing services 77
9.2.3.4. Administrative and support services excluding rental and leasing 78 to 82
services
10. Public Administration and defense 84
11. Other Services
11.1. Education (including coaching and tuition) 85
11.2. Human health activities and care services with/without 86,87,88
accommodation
11.3. Recreational, cultural and sporting activities 90,91,92 (-
92001,
92002),93
11.4. Activities of membership organisations 94
11.5. Personal Services & Other Services, n.e.c
11.5.1. Washing & cleaning of textiles and fur products 9601
11.5.2. Hair dressing and other beauty treatment 9602
11.5.3. Custom tailoring 14105
11.5.4. Other personal service activities 9609,9603
11.6. Private households with employed persons 97
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Sl No. Sector NIC Codes
8 Transport & Storage Section H
9 Accommodation & Food Services Section I
10 Information & Communication Section J
services
11 Financial & Insurance services Section K
12 Real Estate activities Section L
13 Professional, Scientific & Technical Section M
activities
14 Public administration & Defense & Section N and O
Administrative Support Services
15 Education Section P
16 Health & Social work Section Q
17 Arts, Entertainment & Recreation & Section R + Section S
other service activities
18 Activities of households as Section T
employers
19 Activities of Extra-Territorial Section U
Organizations & bodies
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Sl. Data Description Year Source Agency Remark
No.
(5) B-22 City : Industrial
Classification of main and
Marginal Workers in Non-
Household Industry, Trade,
Business, Profession or Service by
Class of Worker and Sex
3 NSS data on Employment- 2011- Ministry of Statistics Unit level data will be
Unemployment 12 and Programme required
Implementation
4 NSS data Un-incorporated Non- 2015- Ministry of Statistics Unit level data will be
agriculture Enterprises Survey 16 and Programme required
Implementation
5 NSS data Debt and Investment 2013 Ministry of Statistics Unit level data will be
Survey and Programme required
Implementation
6 Annual Survey of Industries 2015- Ministry of Statistics Unit level data will be
16 and Programme required
Implementation
7 Economic Census 2013- Ministry of Statistics Unit level data will be
14 and Programme required
Implementation
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