Informal Sector Enterprises: Some Measurement Issues

Abstract

In this paper, we examine the differences in the measures of: (i) profits of an enterprise obtained from a detailed set of questions on incomes and expenses of the enterprise, versus profits obtained through a single direct question; and (ii) gross value added (GVA) obtained using the production approach as the difference between output and intermediate consumption from a detailed set of questions on incomes and expenses, versus GVA using the income approach by asking a few questions on factor incomes, and a single direct question on profits. We use data from the 56th round survey of unorganized manufacturing conducted by the National Sample Survey Organization of India during the period July 2000–June 2001. We also examine if the differences vary with the characteristics of the enterprises, and suggest further empirical research to develop suitable tools for providing accurate measurements of informal sector enterprises.