New Delhi: For the first time, the national accounts division of the Central Statistical Organization (CSO) will conduct a nationwide survey of the not-for-profit sector to measure their contribution to the country’s gross domestic product (GDP).
“The survey will seek to create satellite accounts for the sector to plug the information missing from the GDP due to the voluntary work carried out in such institutions,” said Ramesh Kolli, director general, CSO.
A task force has been set up for the purpose.
Inclusion of the not-for-profit sector is part of the government’s overall effort to account for the unorganized sector, especially since it has estimated that this segment is growing much faster than the organized sector.
There are about two million voluntary organizations, or non-profit institutions (NPIs) as the government calls them, and even a conservative back-of-the-envelope calculation would put their contributions to the Indian GDP at Rs200 billion, he explained.
This works out to a little under 1% of the country’s GDP, at constant prices, estimated at Rs28,482 billion.
The government has been trying to get NPIs into the mainstream and a draft law to streamline and regulate the microfinance sector, the Micro Financial Sector (Development and Regulation) Bill 2007, has already been introduced in Parliament.
Suresh Tendulkar, chairman, National Statistical Commission, explained that “within the category of private final consumption expenditure, there is a lot of information we are now unable to separate, since a lot of voluntary organizations are a part of the household sector. We need to separately account for them.”
According to Kolli, established NPIs in different sectors do get automatically accounted for in the many streams of services in the GDP. For instance, microfinance institutions could be included under financial services. “But there is no measure for evaluating grassroots organizations, and they get included only as part of the residual sector,” he said.
The “residual sector” is how the national accounting system describes the informal or unorganized sector that is beyond the pale of a formal audited accounting system.
Its size is estimated at roughly 58% of the economy and includes agriculture. Out of this, agriculture contributes 19% to the GDP. The rest, which includes home-based work, small trades, voluntary organizations and so on, contributes 39% to the GDP.
The standard measurement norms, according to Kolli, result in a considerable amount of informal economic activity being omitted from the accounts and, therefore, key measures such as the GDP. And since the value of free time and resources is omitted, the contribution to the economy of non-profit organizations employing volunteers could be considerably undervalued.
The proposed survey seeks to develop household “satellite accounts” to measure all voluntary work.
These are “units that provide goods and services or transfers to households and the community, that are not profit-oriented and are operating both voluntarily and independently of government.”
Smita Premchander, secretary of Sampark, a Bangalore-based NPI working to reduce poverty and empowering women, says that “while this a very welcome move for the government to recognize the contribution we are making to the economy, my worry is about various other moves by the government, both central and state, to curb the sector as a whole.”
The small social organizations, according to Premchander, are already facing pressure from various NPIs floated by government agencies as well as the private corporate sector.
Indian NPIs are currently governed by several laws, such as the Companies Act, 1956, Income Tax Act, 1961, the Societies Registration Act, 1860, the Charitable and Religious Trust Act, 1920, the Foreign Contribution (Regulation) Act, 1976, and other state laws.
As a first step for the survey, expected to be completed by October 2008, CSO has approached the registrars of societies and state statistical bureaus of all states. A pilot survey has been carried out by the National Sample Survey Organization, Tendulkar said.
The government is going by the United Nations definition of the NPI sector, which says, among other things, that they may produce private goods sold in the market and earn profit but cannot distribute profit to managers and directors or pay the board. They may be enjoying tax exemption and receiving voluntary contributions and government financial support, but cannot attract equity capital.