Construct asset wise capital stock and capital services for India KLEMS database at industry and aggregate economy level. Previous studies on estimating TFP growth in India have measured capital input utilization as gross fixed capital stock at constant prices using the continuous stock method. The majority of studies used three things to arrive at gross fixed capital stock as a measure of capital input - (1) an estimate of p p p ( ) benchmark capital stock, (2) time series on gross investment and (3) time series of capital goods price .
Asset-wise capital stock growth rates are aggregated using compensation shares for each asset as weights, so that differences in marginal productivities of those assets are incorporated. The objective is to create a capital service series for the 31 India KLEMS industries for the period 1980-2004. The challenge is to build a capital service series from a range of capital holdings following the 31 India KLEMS industry classification.
We need estimates of the capital stock for all detailed asset types and the shares of capital compensation in the total value of production p p. In terms of assets, gross fixed capital formation (GFCF) at current prices for 9 broad sectors, further declassified into public and private units which are further divided into administrative departmental units. When compared to the 31 Indian KLEMS industry classification, this CSO data was only available for the categories collected: TRADE, HOTELS AND RESTAURANTS and OTHER SERVICES.
We used information on value added series for sectors 18, 19 and STEP-I: Non-manufacturing sectors onwards.
By combining public and private, we propose to have a FOUR fold STEP-I: Non-manufacturing sectors cont.
Transport Equipment Transport Equipment
Machinery and Equipment
Software, Hardware and Telecommunication equipments (ICT)
STEP-II: Manufacturing sectors
STEP-II-1:Organized manufacturing sectors
1:Organized manufacturing sectors
By interpolation, we could construct a continuous time series of gross fixed capital formation by asset type from 1964 to 2004. However, some adjustments were necessary to arrive at the final gross fixed capital formation figures for. However, some adjustments were necessary to arrive at the final figures of gross fixed capital formation for the organized manufacturing sectors.
We have information for both the population census and the factory sector for 1973-74, so we multiply the sector census results by this ratio. So the GFCF of the industry for the respective KLEMS sector is divided by the sum of all 13 GFCF sectors and then multiplied by the GFCF of organized NAS production for NAS consistency. Asset ratios are then used to generate GFCFs based on asset type consistency. The available NSSO unit level data on unorganized manufacturing in India which have been used to construct the unorganized capital series are:
STEP-II-2:Unorganized manufacturing sectors
From the NAS, we have one figure for unregistered manufacturing gross fixed capital formation at current price, which must be broken down into the KLEMS of the 13 unorganized sectors of the GFCF and each of these gross fixed capital formations in each sector into three types of assets. The second set of ratios we calculate is a breakdown of gross fixed asset investment into three types of assets for each. The second set of ratios we calculate is the breakdown of gross fixed capital formation into three types of assets for each KLEMS sector.
The ratio of individual assets to total assets in each sector is calculated and classified into three types of assets (1) Buildings and other construction (2) Transport equipment & (3) Plant and machinery + Tools & other fixed assets + ICT. To construct our capital series, we need to construct gross fixed capital formation for 1964–65, but we only have information on four rounds. For the period 1990–91 to 2004–05, we use all four rounds for interpolation, for years when there are no NSSO rounds, for both sets of ratios using linear interpolation.
Breaking NAS Unregister manufacturing GFCF
Three step approachThree-step approach
STEP-I: Total economy ICT estimates
Total economy ICT estimates cont
STEP-II: ICT investment in 31 KLEMS industrial sectors
Benchmark industr wise ICT estimates to NAS/ASI aggregates
STEP-III: Benchmark industry wise ICT estimates to NAS/ASI aggregates, to ensure complete consistency with published official
In this case we took the deflator as the same for all sectors from 1950/1964. We use a different deflator for each of our four assets A1,A2,A3 and A4 representing buildings and construction, transport equipment, non-ICT machinery and ICT machinery respectively. After conversion to real investment series, we must allow for disposal of these capital assets.
The depreciation rate or real depreciation rate for assets A1, A2, A3 and A4 are based on their useful lives. For land and buildings, assuming a lifespan of 80 years, 20 years for transport equipment and 25 years for non-ICT machines. To calculate the capital stock using PIM, we need a benchmark capital on which Benchmark Capital.
The measure or initial capital stock is prepared from the published net fixed capital stock of NAS, for the year the starting year of our data series for non-manufacturing and manufacturing sectors respectively). respectively manufacturing sectors). This net fixed capital stock figure must be distributed across asset types and also across industries (in cases where diverse data are available from NAS, (for e.g. manufacturing trade other services) We use the industry wise distribution in manufacturing, trade, other services) . We use the industry-wise distribution in the BKF for these industries to generate a net fixed capital stock for the 31 sectors.
We then use the distribution of assets in each industry to calculate the distribution of comparative capital assets. After obtaining the initial capital relative to assets or benchmark capital, we use the PIM to construct our capital series for each sector from 1950/1964.
We are therefore able to create a time series of capital services by four assetWe are therefore able to create a time series of capital services by four asset
The real external rate of return, measured as the long-term average of government securities and the prime lending rate, adjusted for consumer inflation. ¾ Hardware and communication investments of the aggregate economy are obtained using the commodity flow approach, using input-output tables, international trade and NAS. ¾ Total economy software investment is obtained from NAS for years after 2000 and extrapolated back using the software/hardware ratio.
Apply asset shares to ASI totals to obtain ICT investments in software, computer hardware and communications equipment. Generate time series of the ICT/non-ICT machinery ratio for years prior to 2005-06 using changes in the ASI ICT/non-ICT machinery sector ratio applied to the NSSO ICT/non-ICT machinery ratio in 2005-06. Discrepancy between aggregated firm-level data and published aggregate data for available years (e.g. ASI ICT/INV ratio for total output vs. Prowess for available years (e.g.
Assume the same annual changes in ICT/non-ICT ratio for both formal and informal manufacturing. Continue to collect this information in subsequent surveys (the data is not available in ASI after 2004!) . available in ASI after 2004!). If ASI and NSSO provide asset breakdown, we can further improve the data by using the ratio for available years.
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