1 2017/18 Social Accounting Matrix for Indian State Uttar Pradesh May 2024 International Food Policy Research Institute, Washington DC, USA Nexus Project The Nexus Project is a collaboration between IFPRI and its partners, including national statistical agencies and research institutions. Our aim is to improve the quality of the social accounting matrices (SAMs) used for computable general equilibrium (CGE) modeling. The Nexus Project develops toolkits and establishes common data standards, procedures, and classification systems for constructing and updating national SAMs. This addresses the need for greater transparency and consistency in SAM construction to strengthen model-based research and policy analysis in developing countries. Nexus SAMs allows for more robust cross-country comparisons of national and sub-national economic structure, especially agriculture-food systems. The Nexus Project’s guiding principles are that all data should be traceable to original sources and/or assumptions, and that all SAMs should be freely available online. Greater transparency and accessibility should facilitate more data validation and participation of the modeling community. Statistics are continuously being revised and errors are often only identified when data is used for analysis, and so we welcome your suggestions on how the SAMs can be improved to reflect new and/or better information. Acknowledgements The Nexus Project receives support from contributors to the CGIAR Trust Fund through the CGIAR Research Initiatives on National Policies and Strategies (NPS) and Foresight, the Bill and Melinda Gates Foundation (BMGF), and the United States Agency for International Development (USAID). For further information, please email: IFPRI-Nexus@cgiar.org mailto:IFPRI-Nexus@cgiar.org 2 Table of Contents 1. Social Accounting Matrices .................................................................................................................... 3 2. Standard Nexus SAM Accounts............................................................................................................. 6 3. Nexus SAM Entries and General Data Sources ................................................................................... 9 4. Balancing Nexus SAMs ......................................................................................................................... 24 5. Uttar Pradesh SAM and Data Sources ............................................................................................... 25 6. Structure of the Uttar Pradesh Economy ........................................................................................... 28 References .................................................................................................................................................. 34 Abbreviations BOPS Balance of Payments Statistics BPM6 Balance of Payments Manual, Sixth Edition CGE Computable General Equilibrium COMTRADE Commodity Trade Statistics Database FAO Food and Agriculture Organization FAOSTAT Food and Agriculture Organization’s Statistical Database GDP Gross Domestic Product GFCF Gross Fixed Capital Formation GFS Government Finance Statistics GFSM Government Finance Statistics Manual GOS Gross Operating Surplus IMF International Monetary Fund IOT Input-Output Table ISIC International Standard Industrial Classification SAM Social Accounting Matrix SNA System of National Accounts SUT Supply-Use Table TRAINS Trade Analysis Information System 3 1. Social Accounting Matrices A national social accounting matrix (SAM) is an economywide data framework that captures the detailed economic structure of a country. A SAM is a square matrix in which each account is represented by a row and a column.1 Each cell reflects a payment from the column account to the row account, i.e., incomes appear along the rows and expenditures along the columns. Double- entry accounting requires that, for each account, total revenue (row total) equals total expenditure (column total). National SAMs are useful for planners and policy analysts in countries where the national government takes all policy decisions. On the other hand, sub-national SAMs become particularly useful in countries with a federal governance structure where both national (or federal) and regional (e.g., states or provinces) governments play an important role in policymaking and public investment decisions. India is an example of a country where a federal system has been adopted and where each state has an independent governance structure. While India’s central government makes decisions about national and foreign policies and implements various development programs in partnership with states, states largely control their own revenue and expenditure decisions, albeit with some influence and oversight from the central government. Indian states are heterogenous in terms of their biophysical resources, agroclimatic conditions, and socio-economic structure. A disaggregated India SAM, therefore, has further advantage in capturing this heterogeneity across states as well as the various economic linkages across states. A state SAM broadly follows the same structure as a national SAM. Table 1 presents the structure of an aggregate state SAM, with verbal explanations of cell entries in place of numbers. Activities and commodities: Nexus SAMs distinguish between “activities” (entities that carry out production) and “commodities” (representing markets for goods and non-factor services) (Pal et. al, 2020). Whereas in a national SAM, these activities are represented at national level, a state SAM splits activities further by state. Due to a lack of intra-state trade flow data, commodity accounts cannot typically be split by state; therefore, commodity accounts represent national-level supply and demand for each commodity across all states. Consequently, the SAM also assumes states do not trade directly with the rest of the world; rather international trade flows are recorded as transactions between the national commodity accounts and the rest of the world.2 Trade helps maintain a balance between national demand and supply of commodities. SAM flows are valued at producer prices in activity accounts and at market prices in commodity accounts, i.e., inclusive of indirect taxes and transactions cost margins. Commodities consist of activities’ output, either exported or sold domestically, and imports. In the activity columns, payments are made to commodities (intermediate demand) and factors of production (value-added, equal to operating 1 For a lengthier discussion on SAMs, see Pyatt and Round (1985) and Reinert and Roland-Holst (1997). 2 Countries typically do not capture information on intra-state trade flows. This makes it difficult to disaggregate the commodity accounts by state in the same way activities are disaggregated. 4 surplus and compensation of employees). In the commodity columns, payments are made to domestic activities, the rest of the world, and various tax accounts (for domestic and import taxes). Government income and payments: The state SAM includes separate accounts for each state government. Revenues and expenditures of state governments are recorded in these accounts. The SAM further includes a single tax account in which all direct and indirect taxes levied at either state- or national-level are collected centrally from where it is allocated across states again. Separate tax accounts are necessary since otherwise the economic interpretation of certain payments becomes ambiguous. Direct payments between the state governments and other domestic institutions are reserved for transfers. State governments also pay the local governments within the state, and this is captured as intra-government transfer payment in the SAM. Payments from the government to factors are captured in the government services activity. Government consumption demand is a purchase of the output from the government services activity, which in turn, pays labor. Domestic nongovernment institutions: Domestic nongovernment institutions consist of households and enterprises. Households are typically disaggregated into various socioeconomic subgroups. In the state SAM, households and enterprises are further disaggregated by state. Enterprises earn factor incomes (reflecting their ownership of capital) and receive transfers from other institutions. Enterprise incomes are used for corporate taxes, enterprise savings, and transfers to other institutions. Unlike households, enterprises do not demand commodities. In the SAM, enterprises are an aggregation of financial and nonfinancial corporations, as defined within the System of National Accounts (SNA). Households in this SAM earn labor income directly from activities and capital income through transfer from enterprises. Households also receive income from domestic and international transfers (known as remittances) from their members based in the same or different states or abroad. The government’s cash transfer to households is another source of households’ income. Households spend their income on consumption, transfer payment to domestic institutions and abroad, and save for their future necessities. Household consumption: Nexus SAMs distinguish between home (own) consumption of activity outputs and marketed consumption of commodities by households. Home consumption, which appears in the SAM as payments from household accounts to activity accounts, is valued at producer prices, i.e., excluding marketing margins and sales taxes that may be levied on marketed commodities. Final household consumption of marketed commodities appears as payments from household accounts to commodity accounts, valued at consumer prices including marketing margins and taxes. 5 Table 1: Standard Nexus Macro SAM of Indian state State Activities National Commodity Market State Factor Market State Enterprises State Households State Governments Taxes National Investment Rest of the World Total State Activities Marketed outputs Private non- marketed consumption Activity income National Commodity Market Intermediate demand Transaction costs Private marketed consumption Government consumption Gross capital formation Exports Total demand State Factor Market Value added Foreign transfers to factors Factor income State Enterprises Factor income to enterprises Enterprise transfers to enterprises Household transfer to enterprises Government transfers to enterprises Foreign transfers to enterprises Enterprise income State Households Factor income to households Enterprise transfers to households Household transfers to households Government transfer to households Foreign transfers to households Household income State Governments Enterprise transfers to government Household transfer to government Government transfers to government Transfer of tax revenue to state governments Foreign transfers to government Government income Taxes Taxes on producers Taxes on products Corporate taxes Household taxes Tax income National Savings Enterprise savings Household savings Government savings Foreign savings Savings Rest of the World Imports Factor payments abroad Enterprise payments abroad Household payments abroad Government payments abroad Foreign exchange outflow Total Activity expenditures Total supply Factor expenditures Enterprise expenditures Household expenditures Government expenditures Tax payments Investment Foreign exchange inflow 6 2. Standard Nexus SAM Accounts Activities and commodities: Standard Nexus SAMs separate domestic production into 42 activities, as shown in Table 2.3 Each activity represents a group of industries from the International Standard Industrial Classification system ([ISIC Revision 4], UNDESA 2008). The 4-digit ISIC codes corresponding to each SAM activity are shown in Table A1 in the appendix. Agricultural activities are further disaggregated using the FAO’s classification system, as shown in Table A2 in the appendix. Information on production technologies comes from national input- output tables (IOT) or supply-use tables (SUT). Activities and commodities have a one-to-one mapping based on a concordance between ISIC industries and Harmonized System products (HS Version 2012).4 Table 2. Standard Nexus SAM Activities and Commodities Code Description Code Description maiz Maize text Textiles, clothing and footwear rice Rice wood Wood and paper products ocer Other cereals chem Chemicals and petroleum puls Pulses nmet Non-metal minerals oils Oilseeds metl Metals and metal products root Roots mach Machinery, equipment and vehicles vege Vegetables oman Other manufacturing sugr Sugarcane elec Electricity, gas and steam toba Tobacco watr Water supply and sewage cott Cotton and fibers cons Construction frui Fruits and nuts trad Wholesale and retail trade coff Coffee, tea and cocoa tran Transportation and storage ocrp Other crops hotl Accommodation and food services catt Cattle and raw milk comm Information and communication poul Poultry and eggs fsrv Finance and insurance oliv Other livestock real Real estate activities fore Forestry bsrv Business services fish Fisheries padm Public administration mine Mining educ Education food Processed foods heal Health and social work beve Beverage and tobacco osrv Other services Source: IFPRI Nexus 42/5/10 standard SAM structure. For more details, refer to: https://www.ifpri.org/project/nexus-project Factors of production: Nexus SAMs separate factors into three broad categories: labor, land, and capital. Labor is further disaggregated across three education-based categories, as shown in Table 3. Information on total labor value-added as a share of sectoral gross domestic product (GDP) is drawn from national IOTs or SUTs. This value-added is disaggregated across labor subcategories 3 Nexus SAMs are aggregations of IFPRI’s detailed country SAMs, which adopt a standard classification (90 activities/commodities, 13 factors, and 15 household groups). Some SAMs are even more detailed, but all can be aggregated to the standard 90/13/15 Nexus structure (and to the 42/5/10 structure documented here). 4 The lengthy concordance between Nexus SAM commodities and HS 2012 codes are available upon request. 7 using wage and salary data as well as imputed earnings of unpaid family members as reported in household and labor force surveys (see Section 5). Capital is the gross operating surplus (GOS), and a portion of the mixed income reported in national IOTs or SUTs that is not assigned either to labor or land factors. Crop and livestock capital earnings are paid directly to households, while capital earnings in other sectors are paid to enterprises. Table 3. Standard Nexus SAM Factors Code Description Notes lab-n Labor - low education Not finished primary schooling (i.e., 0-6 years of schooling) lab-p Labor - medium education Finished primary, but not finished secondary schooling (i.e., 7-11 years of schooling) lab-s Labor - high education Finished secondary or tertiary schooling (12+ years of schooling) Lnd Land - agricultural crops Cultivated crop land Cap Capital For agricultural crops (e.g., tractors, irrigation infrastructure) Source: IFPRI Nexus 42/5/10 standard SAM structure. For more details, refer to: https://www.ifpri.org/project/nexus- project Households: Nexus SAMs separate state populations into 10 representative household groups, as shown in Table 4. Rural and urban households are distinguished based on country’s official definition of these households and are disaggregated into per capita consumption quintiles. Quintiles are defined at the national level, meaning that rural and urban quintiles are comparable and that the combined population of each quintile across all states is equal to a fifth of the national population. Per capita consumption groups are not adjusted for adult-equivalency and, like national accounts, include all consumption items reported in a country’s household survey (see Section 5). The latter implies that the consumption estimates and quintiles in Nexus SAMs may deviate from poverty-oriented consumption measures and groupings, since these typically use adult equivalence scales, exclude “nonessential” items (e.g., airplane tickets), and impute a “use value” for durable and semidurable assets (in addition to housing). Table 4. Standard Nexus SAM Households Code Description Notes hhd-r1 Rural - quintile 1 Rural households of the state separated into national per capita consumption expenditure quintiles hhd-r2 Rural - quintile 2 hhd-r3 Rural - quintile 3 hhd-r4 Rural - quintile 4 hhd-r5 Rural - quintile 5 hhd-u1 Urban - quintile 1 Urban households of the state separated into national per capita consumption expenditure quintiles hhd-u2 Urban - quintile 2 hhd-u3 Urban - quintile 3 hhd-u4 Urban - quintile 4 hhd-u5 Urban - quintile 5 Source: IFPRI Nexus 42/5/10 standard SAM structure. For more details, refer to: https://www.ifpri.org/project/nexus-project 8 Other accounts: The remaining accounts in the Nexus SAMs are shown in Table 5. These include the transaction costs of moving goods between producers, domestic markets, and national borders, as well as the various indirect taxes imposed on marketed commodities. Table 5. Standard Nexus SAM Accounts Code Description Notes a___ Activities See Table 2 for the list of activity accounts c___ Commodities See Table 2 for the list of commodity accounts f___ Factors See Table 3 for the list of factor accounts h___ Households See Table 4 for the list of household accounts trc Transaction costs From moving goods between producers, markets and/or borders ent Enterprises Financial and non-financial corporations gov Government Government as an institution, not as a producing activity atax Taxes - activity Indirect taxes on producers dtax Taxes - direct Direct taxes on enterprises and households etax Taxes - export Indirect taxes on exports ftax Taxes - factor Direct taxes on factor incomes mtax Taxes - import Indirect taxes on imports (import duties) stax Taxes - sales Indirect taxes on domestic sales (VAT, GST and excise duty) s-i Savings-investment Investment is gross fixed capital formation dstk Change in stocks Inventory accumulation or depletion row Rest of world All foreign countries and economies total Total Row and column totals Source: IFPRI Nexus 42/5/10 standard SAM structure. For more details, refer to: https://www.ifpri.org/project/nexus-project 9 3. Nexus SAM Entries and General Data Sources The previous section outlined the broad structure of a Nexus SAM for Indian states, including its standardized classification of accounts. This section describes each block of cells in the Macro SAM for Indian states following the numbered sequence shown in Table 6. One advantage of Nexus SAMs is that their Macro SAMs have a common classification or definition of cell entries. The Macro SAMs for Indian states are compiled using four key data sources. First, the International Monetary Fund’s (IMF) Government Finance Statistics (GFS) database provides detailed information on government revenues and expenditures and follows a standardized accounting framework. Nexus SAMs use the 2014 GFS Manual (GFSM) (IMF 2016b) and a mapping between GFSM codes and Macro SAM accounts can be found in Table A3 in the appendix. Second, the IMF maintains detailed Balance of Payments Statistics (BOPS) (IMF 2016a). Nexus SAMs uses the sixth BOPS Manual (BPM) and a mapping between BPM6 codes and Macro SAM accounts can be found in Table A4 in the appendix. The conversion from US dollars to local currency uses the official exchange rate, as reported in World Development Indicators (World Bank 2021). Third, countries (in our case India) maintain their own national accounts that include production and expenditure-based GDP estimates. To the extent possible, the Nexus SAMs, like most countries, follow the United Nation’s System of National Accounts (United Nations et. al. 2009). Fourth, the national accounts department also publishes state-level gross value added (GVA) for different activities. In case of India, state accounts do not provide expenditure-based GDP estimates. However, these are estimated from official survey data. Table A5 in appendix describes the detailed data sources corresponding to different Nexus SAM accounts. 1. Intermediate demand (Commodities | Activities) Definition: Intermediate demand includes payments by activities for the commodities used as non-factor inputs in production processes. For example, payments by ‘maize’ activity to the ‘chemical’ commodity for fertilizer inputs used to grow maize. Estimation: Intermediate demand for each activity is estimated in three steps. First, the ratio of total intermediate demand to total value-added in each activity is derived from national IOT/SUTs. Since IOT/SUTs are not available at the sub-national/state level, we have used more recent national accounts, agricultural and industrial surveys, and/or censuses of economic activity. Second, this ratio is used to derive the absolute level of total intermediate demand based on the estimated level of activity value-added (see Entry 2 below). Third, total intermediate payments are disaggregated across individual commodities using shares derived from national IOT/SUTs and agricultural and industrial surveys. 10 Table 6: Numbered Entries in Nexus Macro SAM of Indian State State Activities National Commodity Market State Factor market State Enterprises State Households State Governments Taxes National Investment Rest of the World State Activities 4 18 National Commodity Market 1 5 19 26 33 35 State Factor Market 2 36 State Enterprises 8 12 20 27 37 State Households 9 13 21 28 38 State Governments 14 22 29 32 39 Taxes 3 6 10 15 23 National Savings 16 24 30 34 40 Rest of the World 7 11 17 25 31 11 2. Value-added (Factors | Activities) Definition: Value-added is the returns earned by factors during the production process, such as labor wages and salaries, land rents, and capital profits. Land and capital include gross operating surplus, part of which may be reported as “mixed income” in national accounts or IOT/SUTs. Estimation: Total value-added by activity is estimated in two steps. First, national accounts report the level of gross domestic product (GDP measured in basic prices) for aggregate sectors, and these are assigned to groups of SAM activities. Second, aggregate GDP estimates are disaggregated to the level of the SAM activities using information on sub-sectoral production from sources beyond national accounts. The value of activity level agricultural production is estimated using the production quantity and producer price data from the national Ministry of Agriculture and/or the FAO’s FAOSTAT database (FAO 2021). Total value-added in each agricultural sector is estimated by multiplying the ratio of GDP to gross output (derived from IOT/SUTs) by the estimated value of activity gross output. Similarly, information on activity-level industrial production is derived from manufacturing or industrial surveys (or possibly from changing weights of producer price indices). Further, the state-level value added for each activity is estimated by multiplying activity-wise value-added to output ratio of the state with the value of output of the corresponding activity of that state. The value-added output ratios are estimated using the Cost of Cultivation Survey of the Ministry of Agriculture & Farmers Welfare, the Annual Survey of Industries of the Ministry of Statistics and Programme Implementation (MOSPI), and the ‘Technical Report on Services Sector Enterprises in India’ of the National Sample Survey Office under MOSPI. When summed across states, the activity-wise value-added estimates must be consistent with national level value-added estimates. The above-mentioned surveys also provide information on shares of labor, capital, and land in total value-added of each activities. This information is useful to split activity-wise value- added into payment for labor, capital, and land. The labor payment by each activity is further disaggregated across worker categories (shown in Table 3) by using national household and/or labor force survey data.5 In India, the Periodic Labor Force Survey of the National Statistical Office documents employment and unemployment by state.6 This survey shows workers’ sector of employment, their earnings (wages, salaries, in-kind, etc.), and education levels. Earnings from farm and non-farm enterprises are usually reported at the household level in surveys, and in such cases, these earnings are allocated across individual household members based on their reported employment status and sector of employment. It is assumed that paid 5 The national household surveys used to build Nexus SAMs are often the same as the surveys used to estimate poverty rates or the weights for the consumer price index (e.g., Living Conditions Monitoring Surveys). 6 Periodic labor force survey data of the year 2017/18 is used to estimate activity wise employment and wage payment across states. 12 and unpaid family members earn equal shares of household enterprise incomes (net of input costs). 3. Taxes on producers (Taxes | Activities) Definition: Net taxes on production (or subsidies if value is negative). Estimation: The total value of activity taxes is taken from the IMF’s GFS and includes “taxes on payroll and workforce” (GFSM code 112). This is disaggregated across activities using information from national tax authorities and/or from the IOT/SUT. For the latter, tax rates are derived from the IOT/SUT and then applied to the sectoral value of GDP and intermediate payments (see Entries 1 and 2). After implementation of Goods and Service tax (GST) in India from July 2017, tax rates are uniform across states, and therefore, we use national average tax rates for each activity across states. This provides initial estimates of net activity tax payments, which are then scaled to match the total value of activity tax collections. 4. Marketed output (Activities | Commodities) Definition: Value of domestically produced goods and services that are supplied to markets, either for domestic use or for export. Marketed output is net non-marketed or home produced and consumed goods and services (see Entry 18). Estimation: This is a residual balancing item for activities. The value of gross output less the value of non-marketed consumption is paid from each activity to its corresponding commodity, thereby balancing activity’s rows and columns. 5. Transaction costs (Commodities | Commodities) Definition: Trade and transport costs associated with moving goods between producers, markets and national borders, either for domestic, import or export trade. For example, exporters incur transport fees when moving goods from their factories to the national border, whereas importers incur fees when delivering goods to domestic markets. Estimation: There are two approaches to estimating transaction costs in Nexus SAMs. First, margin payments as a share of total demand are estimated using past IOT/SUTs. These rates are then applied to total demand estimates in the SAM, including exports, to derive new transaction costs. Second, margins are estimated by the gap between producer and market prices, net of indirect taxes, using price data supplied by national statistical agencies. The first approach is preferred and is the one typically used for Nexus SAMs (see detailed description of each SAM’s data sources for information on which approach was used). Finally, transaction cost margins generate income for trade and/or transport activities. 13 6. Taxes on products (Taxes | Commodities) Definition: All indirect taxes imposed on goods and services (or subsidies if value is negative). Estimation: Nexus SAMs separate taxes on products into three categories: sales taxes (stax), export taxes (etax), and import tariffs (mtax) (see Table 5). The total value of tax collections is taken from the IMF’s GFS. Sales taxes are “taxes on goods and services” (GFSM code 114), which is a summation of various tax instruments, most importantly value-added taxes (GFSM 11411), sales taxes (GFSM 11412), and excise duties (GFSM 1142). Import tariffs are “taxes on international trade and transactions” (GFSM 115), excluding “taxes on exports” (GFSM 1152), which are assigned to export taxes in the SAM. Tax revenues are disaggregated across commodities using national tax authority data and/or tax rates estimated from the IOT/SUT. If the IOT/SUT is outdated, then weighted import tariff rates are taken from the United Nations Conference on Trade and Development’s Trade Analysis and Information System (TRAINS) (UNCTAD 2021). Tax rates are applied to the level of domestic sales, imports or exports (see Entries 7 and 35). This provides an initial estimate of commodity level tax payments, which are then scaled to match the total value of each tax revenue category, as estimated above. 7. Imports (Rest of World | Commodities) Definition: Value of goods and services imported from abroad, less the cost of carriage, insurance, and freight. Estimation: The total value of imports is taken from national accounts, and this is then disaggregated into total goods and total services using current account data from the IMF’s BOPS (i.e., BPM6 codes BMG for “goods, debit” and BMS for “services, debit”). BOPS provides detailed information on services imports by commodity, and this is used to assign imports to service commodities in the SAM (see Table A4 in the appendix). Goods imports are disaggregated across commodities using 6-digit HS gross import flows from the United Nations Commodity Trade Statistics (COMTRADE) database (UNSD 2021). 8. Factor income to enterprises (Enterprises | Factors) Definition: Capital payments to enterprises after paying factor taxes and transfers to the rest of the world (see Entries 10 and 11). These capital payments equal gross operating surplus generated outside the crop and livestock sectors (entry 9). The GOS includes the value of consumption of fixed capital during the production process. Estimation: This is a residual balancing item for the capital account. Total capital income minus capital taxes and foreign transfers is paid to the enterprise account, thereby balancing capital’s row and column. 14 9. Factor income to households (Households | Factors) Definition: Labor, land, and crop/livestock capital payments to households, after paying factor taxes and transfers to the rest of the world (see Entries 10 and 11). These payments equal compensation to workers, returns to land, and the capital earnings (i.e., GOS) generated in the crop and livestock sectors. Estimation: This is a residual balancing item for labor and land. Total factor incomes less factor taxes and foreign transfers are paid to individual household accounts, thereby balancing these factors’ rows and columns. Labor payments to households are disaggregated across household and labor categories using information from national household or labor force surveys (see Entry 2 on treatment on workers’ shares of household enterprise incomes). Land and livestock capital payments to households are disaggregated using survey households’ reported revenues from agricultural crops and livestock. 10. Factor taxes (Taxes | Factors) Definition: Direct taxes paid by capital to the government. Estimation: The value of capital tax collections is taken from the IMF’s GFS. Factor taxes are “taxes on property” (GFSM code 113), which is a summation of various taxes, including wealth and estate taxes and capital levies. 11. Factor payments abroad (Rest of World | Factors) Definition: Labor, land and capital incomes paid to foreign households or enterprises. For example, workers belonging to foreign households may earn some or all of their labor incomes in domestic industries and this income may be repatriated back to workers’ home countries. Similarly, some profits generated by foreign-owned mining companies may be repatriated to company headquarters in another country. Estimation: Factor transfers to the rest of the world are from the IMF’s BOPS. Labor transfers are “compensation of employees, debit” (BPM6 code BMIPCE). Capital transfers are “investment income, debit” (BPM6 BMIPI), which includes, amongst others, payments on equity and investment funds to foreign investors. 12. Enterprise transfers to enterprise (Enterprise | Enterprises) Definition: Indirect capital payments by enterprises to enterprise after paying corporate taxes, saving and transferring income to household, government and the rest of the world (see Entries 15, 16, 13, 14, and 17, respectively). This includes intra- and inter-enterprise transfer of gross 15 operating surplus. For example, intra-enterprise transfer is the payment between local enterprises and their headquarters. The inter-enterprise transfer payment includes payment of insurance premium between enterprise and financial corporations. Estimation: The transfer between enterprises is a special feature of the state SAM that captures interstate transfer payment through enterprises. There was no direct data available to estimate this transfer payment for Indian states. Therefore, we first assumed the difference between state’s share in total national capital formation and its share in national capital income as the transfer payment receipt or payment to each state’s enterprises. Further, the interstate distribution of such transfer payment or receipts is estimated based on the aggregate enterprise income and the distribution of that income across states. The Annual Survey of Industries and the ‘Technical Report on Services Sector Enterprises in India’ of the National Sample Survey Office are used to estimate the distribution of enterprises’ incomes across the Indian states. 13. Enterprise transfers to households (Households | Enterprises) Definition: Indirect capital payments by enterprises to households, after paying corporate taxes and saving and transferring income to enterprises, government and the rest of the world (see Entries 15, 16, 12, 14, and 17, respectively). This includes indirect gross operating surplus paid from the earnings of household non-farm enterprises. Estimation: This is a residual balancing item for the enterprise account. Total enterprise income less taxes and transfers are paid to households, thereby balancing the enterprise row and column. Enterprise earnings are paid to households based on households’ earnings from non-farm enterprises, dividends and private pension funds as reported in national household surveys. 14. Enterprise transfers to government (Government | Enterprises) Definition: Transfers from enterprises (financial and non-financial corporations) to governments, other than direct tax payments (see Entry 14). For example, domestic banks may provide loans to the government, or parastatal enterprises may pay dividends or repay loans to the general government. Enterprises may also contribute to public social welfare schemes on behalf of their employees. Estimation: Transfers received by the government from financial and non-financial corporations are taken from the IMF’s GFS. This is “property income” (GFSM code 141), which includes, amongst others, interest and dividend payments and payments from rented public property. Transfers from enterprises also include “other taxes” (GFSM 116), which are either paid by business or are unidentifiable. Finally, enterprises include employer contributions to social security (GFSM 1212) and other social schemes (GFSM 1222). In case of state SAM in India, we have used the comptroller and auditor general database to estimate detail sources of revenue of enterprise transfer to each state governments. 16 15. Corporate taxes (Taxes | Enterprises) Definition: Corporate and other direct taxes paid by enterprises (financial and non-financial corporations) to the government. Estimation: The total value of taxes collected from enterprises is taken from the IMF’s GFS. This includes taxes “payable by corporations and other enterprises” (GFSM code 1112) and “other taxes on income, profits, and capital gains” (GFSM 1113). 16. Enterprise savings (Savings | Enterprises) Definition: Domestic private savings by enterprises (financial and non-financial corporations). This includes reinvested earnings as well as the value of the consumption of fixed capital (i.e., provision for capital depreciation). Estimation: Total domestic private savings are back calculated by subtracting public and foreign savings from the value of gross capital formation (see Entries 30, 33, 34 and 40). Unfortunately, few developing countries have the detailed national accounts data needed to disaggregate domestic private savings across corporations (enterprises) and households. Accordingly, in the absence of this information, the Nexus SAMs assume that enterprises and households have similar savings rates, after enterprises have subtracted their allowance for the depreciation of working capital. 17. Enterprise payments abroad (Rest of World | Enterprises) Definition: Secondary income transfers from domestic financial and non-financial enterprises to the rest of the world. Estimation: The value of enterprise foreign payments comes from the IMF’s BOPS. This includes “other transfers, debit” (BPM6 code BMISOOT). In case of state SAMs, Reserve Bank of India database on international remittances is used to estimate enterprises’ foreign payments. 18. Private non-marketed consumption (Activities | Households) Definition: Activity output that is both produced and consumed within the household, i.e., “own” or “home” consumption. Estimation: Non-marketed consumption is estimated in three steps. First, the share of total private consumption for each Nexus SAM commodity is estimated using aggregate private consumption from national accounts and commodity-level consumption from national household surveys. Second, the share of home consumption in total consumption of each 17 commodity is estimated using household surveys, and this share is then used to separate total commodity consumption into marketed and non-marketed components. Third, home consumption is disaggregated across household groups using household survey data. Home consumption is defined as any products not purchased in markets, including the consumption of both home-produced products and products received “in-kind” from other households (i.e., without monetary payment). 19. Private marketed consumption (Commodities | Households) Definition: Commodities that are purchased in markets and consumed by households. Estimation: Marketed consumption is estimated in three steps. First, the share of total private consumption for each Nexus SAM commodity is estimated using aggregate private consumption from national accounts and commodity-level consumption from national household surveys. Second, the share of home consumption in total consumption of each commodity is estimated using the household surveys, and this share of then used to separate total commodity consumption into marketed and non-marketed components. Third, marketed consumption is disaggregated across household groups using household survey data. Marketed consumption is defined as any products purchased in markets, i.e., not home-produced or received “in-kind” from other households. 20. Households transfer to enterprises (Households | Enterprise) Definition: Payments by household to the enterprise (see Entry 20). For example, households’ payments for general insurance premium (e.g., health insurance premiums, term insurance etc.), and purchase of financial stocks. Estimation: The total value of transfers is taken from the national accounts of the country. This database provides information on the aggregate level of current and capital transfers between the institutions. The total transfer payment from households to enterprise is split across states using the share of capital income obtained from entry 13 in Table 6. The state-wise estimates are further split across household quintiles based on their expenditure shares. 21. Household transfers to household (Households | Households) Definition: Transfer payments by household to other households (see Entry 21). For example, migrated household members transfer part of their income to their family members. Entry 21 in the nexus SAM accounts for domestic transfer within the households. Estimation: The total value of households’ transfers income is reported in the national accounts of the country. In India, the National Sample Survey Office’s (NSSO) report on ‘Migration in India, 2007-2008’ provides detailed information on domestic remittance flows between household quintiles and states (NSSO 2010). Estimated shares of transfer income in total 18 income by state and quintile are applied to the national accounts’ transfer income to obtain a detailed matrix of estimates of intra-household transfers. 22. Household transfers to government (Government | Households) Definition: Payments by household to the government other than for direct taxes (see Entry 22). For example, households may contribute to public social welfare schemes, including retirement and healthcare funds. Estimation: The total value of transfers is taken from the IMF’s GFS. This is social security and other social contributions, including payments by employees (GFSM codes 1211 and 1221), self-employed and unemployed people (GFSM 1213), and unallocable and imputed contributions (GFSM 1214 and 1223). Household transfers to government also include various other revenue sources, including sales of goods and services (GFSM 142), and fines penalties and forfeits (GFSM 143). 23. Household taxes (Taxes | Households) Definition: Direct income or personal taxes paid by households. For example, households often “pay as you earn” (PAYE) taxes to the government based on their wages and salaries. Estimation: Total tax collection is taken from the IMF’s GFS. It includes taxes on income, profits and capital gains that are “payable by individuals” (GFSM code 1111). This is disaggregated across the household groups in the Nexus SAMs using personal income tax rates reported by households in the national household survey. If tax data is not available or is poorly captured in the survey, then incomes from secondary/tertiary educated labor is used as a proxy for disaggregating total direct tax collections (see Table 3). 24. Household savings (Savings | Households) Definition: Domestic private savings by households. Estimation: Total domestic private savings are back calculated by subtracting public and foreign savings from the value of gross capital formation (see Entries 30, 33, 34 and 40). Unfortunately, few countries have the detailed national accounts data needed to disaggregate domestic private savings across enterprises (corporations) and households. Accordingly, in the absence of detailed information, the Nexus SAMs assume that enterprises and households have similar savings rates, after enterprises have subtracted their allowance for the depreciation of working capital. Household savings are then disaggregated across household groups in the SAM using information from national household surveys. Although survey households often report the value of deposits made into bank accounts or the amount of savings during the year, including private pension contributions, this information is often poorly captured. In such 19 cases, proxy indicators are derived from household earnings from enterprises and incomes from more educated labor. 25. Household payments abroad (Rest of World | Households) Definition: Secondary income transfers from households to the rest of the world. Estimation: The value of household foreign payments comes from the IMF’s BOPS. This includes “personal transfers, debit” (BPM6 code BMISOPT). Transfers are disaggregated across household groups in the SAM using information from national household surveys that capture the amount of remittances households sent abroad. 26. Government consumption (Commodities | Government) Definition: Government recurrent spending on goods and services. Public consumption demand by the government institution is the primary source of demand for services produced by government activities, which consist of public administration, education, and health and social work. Estimation: The total value of government consumption is drawn directly from a country’s national accounts data. This is cross-checked against recurrent expenditures in the IMF’s GFS, which reports government’s “compensation of employees” (GFSM code 21), “use of goods and services” (GFSM 22), and “consumption of fixed capital” (GFSM 23). Total consumption is disaggregated across commodities using budget shares derived from the IOT/SUT, and then adjusted to reflect changes in the composition of supply of public administration, education, and health and social work services. In the case of state SAMs, state governments’ account statements are used to split national government expenditure on commodities across the states. 27. Government transfers to enterprises (Enterprises | Government) Definition: Transfers from the government to enterprises (financial and non-financial corporations). For example, the government may pay interest or repay the principal on a loan from a domestic bank, or the government may lend money to parastatal companies. Estimation: Transfers paid by the government to financial and non-financial corporations are taken from the IMF’s GFS. This is interest payments to non-government residents (GFSM code 242), subsidies to public corporations and private enterprises (GFSM 25) and other expenses (GFSM 28). The latter includes property expenses like dividend and rental payments. 28. Government transfers to households (Households | Government) 20 Definition: Payments by the government to households. For example, governments may pay households from a public pension or cash transfer scheme. Estimation: The total value of transfers is taken from the IMF’s GFS. This is social benefits (GFSM code 27), which includes social security, social assistance, and other employment- related social benefits, each of which may be paid in cash or in-kind. 29. Government transfers to government (Government | Government) Definition: Payments by the state governments to local government. For example, governments may pay the district or village administration as a grant. Estimation: The total value of transfers is taken from the state government’s accounts. 30. Government savings (Savings | Government) Definition: Recurrent fiscal surplus for the government (or deficit if the cell entry is negative). Note that this is the difference between recurrent revenues and expenditures, i.e., before public capital investment. Recurrent expenditures include public consumption spending (see Entry 26) and transfers to domestic and foreign institutions (see Entries 27, 28, 29 and 31). Estimation: This is the residual balancing item for the government account, although it cross- checked against the difference between total revenues and total recurrent expenses in the IMF’s GFS (GFSM codes 1 and 2). Any deviation from GFS data is due to the Nexus SAM giving preference to statistics from national accounts (for indirect tax collections and government consumption spending, see Entries 3, 6 and 26) and to the IMF’s BOP database (for foreign transfers, see Entries 31 and 39). 31. Government payments abroad (Rest of World| Government) Definition: Transfers from the government to the rest of the world. For example, government may provide foreign aid to other countries, or must pay interest or repay loans to foreign governments and financial enterprises. Estimation: The value of government foreign payments comes from the IMF’s BOPS, and is cross-checked against the IMF’s GFS. BOPS-based payments include “general government transfers, debit” under secondary income (BPM6 code BMISG). GFS-based payments include interest payments to non-residents (GFSM code 241), and grants paid to foreign governments and international organizations (GFSM 26). 32. Tax revenues paid to government (Government | Taxes) 21 Definition: Revenue transferred from individual tax accounts to the government account. Estimation: This is a residual balancing item for the tax account in the SAM. The distinction between taxes and the government account allows the SAM to disaggregate indirect taxes on commodities such as sales taxes, export taxes, and import tariffs (see Entry 6). 33. Gross capital formation (Commodities | Investment) Definition: The combination of gross fixed capital formation (GFCF) and changes in stocks or inventories. GFCF is the spending on commodities involved during the investment in capital stock. For example, investment typically involves the purchase of machinery, vehicles and equipment, as well as payment for constructing new factories and storage facilities. Changes in stocks occur when businesses carryover stock for sale in subsequent years, or when they sell products in the current year that were produced in previous years. Positive values in the SAM indicate an accumulation of stocks. Finally, the Nexus SAMs combine private, public and foreign investment, just as they combine private, public and foreign savings (see Entries 16, 24, 30 and 40). Estimation: The Nexus SAMs distinguish between GFCF and changes in stocks. SAM entries are determined in two steps. First, the total value of GFCF and stock changes are taken from official national accounts data. Second, these total values are disaggregated across commodities using expenditure shares from the IOT/SUT. In some cases, countries report the composition of GFCF on an annual basis, in which case this information is used in place of the IOT/SUT shares. The same is true for stock changes, although most countries only report detailed stock changes when a new IOT/SUT is produced during the rebasing of national accounts. Although commodity level stock changes in Nexus SAMs may deviate from national accounts, this may be less concerning since these flows are typically exogenous within economywide models. 34. Inventory or stock change adjustment (Savings | Investment) Definition: The accumulation of stocks for sale in subsequent years is added to the amount of savings available in the country (and a depletion of stocks reduces the savings). For example, if an activity produces a machine this year for sale next year, then they are effectively saving the value of the machine (or investing in future sales). This transfer of total stock changes to the savings account was not shown in Table 1, because it nets to zero in SAMs that aggregate gross fixed capital formation (GFCF) and changes in stocks. Estimation: This is a residual balancing item for the change in stocks account (see Entry 33). The total value of stock changes is paid to the savings account. A positive value means a net accumulation of stocks. 35. Exports (Commodities | Rest of World) 22 Definition: Value of goods and services exported abroad. Estimation: The total value of exports is taken from national accounts, and this is then disaggregated into total goods and total services using current account data from the IMF’s BOPS (i.e., BPM6 codes BXG for “goods credit” and BXS for “services credit”). BOPS provides detailed information on services export by commodity, and this is used to assign exports to service commodities in the SAM (see Table A4 in the appendix). Goods exports are disaggregated across commodities using 6-digit HS gross export flows from the United Nations Commodity Trade Statistics (COMTRADE) database (UNSD 2021). 36. Foreign transfers to factors (Factors | Rest of World) Definition: Labor, land and capital incomes received from the rest of the world. For example, workers belonging to domestic households may earn some or all of their labor incomes working in a foreign country and this income may be repatriated. Similarly, domestically owned companies may repatriate profits earned abroad. Estimation: Factor transfers from the rest of the world are taken from the IMF’s BOPS. Labor receipts are “compensation of employees, credit” (BPM6 code BXIPCE). Capital receipts are “investment income, credit” (BPM6 BXIPI), which includes, amongst others, income on foreign equity and investment funds. 37. Foreign transfers to enterprises (Enterprises| Rest of World) Definition: Secondary income transfers from the rest of the world to domestic financial and non-financial enterprises. Estimation: The value of enterprise foreign receipts comes from the IMF’s BOPS. This includes “other transfers, credit” (BPM6 code BXISOOT). In case of state SAMs, Reserve Bank of India database on international remittances is used to estimate enterprises’ foreign receipts. 38. Foreign transfers to households (Households| Rest of World) Definition: Secondary income transfers to households from abroad. For example, households may receive remittance incomes from family members working abroad. Estimation: The value of household foreign income comes from the IMF’s BOPS. This includes “personal transfers, credit” (BPM6 code BXISOPT). Transfers are disaggregated across household groups in the SAM using information from national household surveys that capture the amount of remittances households received from abroad. 23 39. Foreign transfers to government (Government| Rest of World) Definition: Transfers from the rest of the world to the government. For example, government may receive foreign aid from other countries. Estimation: The value of government foreign receipts comes from the IMF’s BOPS, and this is cross-checked against the IMF’s GFS. BOPS-based receipts include “general government transfers, credit” under secondary income (BPM6 code BXISG). GFS-based payments include grants received from foreign governments and international organizations (GFSM code 131 and 132). 40. Foreign savings (Savings | Rest of World) Definition: Current account balance equal to total foreign capital or savings inflows. Estimation: This is the residual balancing item for the rest of world account, although it cross- checked against the current account balance reported in the IMF’s BOPS (BPM6 code 1). Any deviation from BOPS data – and this is usually small – is due to the Nexus SAM giving preference to total the value of imports and exports reported in national accounts (see Entries 7 and 35). 24 4. Balancing Nexus SAMs Nexus SAMs are constructed in three stages using the IFPRI SAM Building Toolkit. The toolkit uses a standardized template in Microsoft-Excel® to construct and export an unbalanced SAM to a compilation and balancing program that is executed in the General Algebraic Modeling System (GAMS). During the first stage of the SAM Toolkit, a Macro SAM is constructed using the data described in previous sections. The three main data sources for the Macro SAM are national accounts, GFS, and BOPS. Unfortunately, in many developing countries, these three data sources are not fully reconciled. For example, the total value of exports and imports in national accounts may not exactly match the values appearing in BOPS. Preference is given to certain data sources. For instance, Nexus SAMs always use national accounts data instead of trade data from BOPS or government consumption spending estimates from GFS. Similarly, preference is given BOPS over GFS when estimating transfers between the government and the rest of the world. Row and column totals in the Macro SAM are reconciled manually through various residual balancing items, as listed below: • Marketed supply balances the activity accounts (see Entry 4). • Transfers to households or enterprises balances the factor accounts (see Entry 8 and 9). • Transfers to households or enterprises balances the enterprise account (see Entry 12 and 13). • Household and government savings balance the household, government, and national investment accounts (see Entries 24, 30 and 34). • Transfers to state governments balance the national tax account (see entry 32). • Foreign savings balances the rest of world account (see Entry 40). During the second stage, income and expenditure shares derived from surveys and other sources are used to disaggregate the Macro SAM entries across detailed activities, commodities, factors, and households. Sectoral and product data is used to disaggregate production and trade, and survey data is used to disaggregate factor and household incomes and consumer demand. There are always imbalances between the level of supply and demand for commodities and between household incomes and expenditures. These imbalances are manually checked for misclassification issues and logical errors in data collection and reporting. However, imbalances invariably remain, and so Nexus SAMs use cross-entropy estimation techniques to reconcile row and column totals at the detailed commodity and household level. For more information on cross-entropy-based reconciliation of SAM accounts, see Robinson et al. (2001). Finally, in the third stage, Standard Nexus SAM entries are further disaggregated to include sex- disaggregated and regional information. As above, separating activities, factors and households always introduces new imbalances, and these are reconciled using a second round of cross-entropy estimation. 25 5. Uttar Pradesh SAM and Data Sources The 2017/18 Uttar Pradesh (UP) SAM follows the Standard Nexus Structure (see Section 2). Table 7 lists the specific data sources used to construct the SAM. Most sources are consistent with those used in Standard Nexus SAMs (see Section 3). A detailed description of the method for estimation of various accounts of Uttar Pradesh SAM is given in Appendix Table A5. Activities: India’s national SUT for the year 2017/18 is aggregated to the Nexus activities using the ISIC Revision 4 concordance (see Table A1 in the appendix). National and state accounts provide GDP estimates for 19 sectors, which are further disaggregated to 93 sectors using crop and livestock production and producer price data from FAOSTAT (see Table A2), and national accounts data of the Indian states. GDP values for manufacturing subsectors are obtained from the Annual Survey of Industries for the states in India. National accounts provide sufficient detail for the service sector GDP. The final SAM is aggregated to the standard 42 activities for dissemination. Table 7. Summary of Data Sources for the 2017/18 Uttar Pradesh SAM Stages of constructions Data sources Stage 1: Disaggregate national Supply Use Table across states. • Used national Supply Use Table (SUT) for 2017/18 available at the website of the Ministry of Statistics and Programme Implementation (MOSPI). Link for reference: https://mospi.gov.in/publication/supply-use-tables. Disaggregated agriculture, forestry and fisheries sectors across states using: • State-wise value of output. The data on state- and item-wise value of crops’ output is available from National Statistical Office ([NSO] 2022), MOSPI. • State-wise intermediate input and value added output ratio for agriculture. The plot level summary data under the Cost of Cultivation 2017-18 is available at Directorate of Economics and Statistics, Ministry of Agriculture and farmers Welfare. Link for reference: https://desagri.gov.in/document-report-category/plot-wise-summary- data/. • State-wise value added for agriculture, livestock, forestry, and fishing. The data on gross state value added by economic activities is available at the National Accounts Division, MOSPI. Link for reference: https://www.mospi.gov.in/data. • State-wise intermediate use for livestock, forestry and fishing. For the aggregate sector, value added and output data from MOSPI is used to estimate state-wise intermediate use. Further, national SUT is used to disaggregate to SAM sectors. Disaggregated mining sectors across states using: • State-wise value of output. The data is taken from Indian Mineral Statistics at a Glance, 2017-18 from Indian Bureau of Mines (2020) and Energy Statistics 2018 from Central Statistical Office (2018), MOSPI. • State-wise value added from mining sector. The data on gross state value added by economic activities is available at the National Accounts Division, MOSPI. Link for reference: https://www.mospi.gov.in/data. • Intermediate and value-added output ratio. National average ratios are assumed for states. National average intermediate and value added output ratios are obtained from national Supply Use Table for 2017-18. Disaggregated manufacturing sectors across states using: https://desagri.gov.in/document-report-category/plot-wise-summary-data/ https://desagri.gov.in/document-report-category/plot-wise-summary-data/ https://www.mospi.gov.in/data https://www.mospi.gov.in/data 26 • State-wise value of output, value added, and intermediate input use for organized manufacturing sectors. The data is obtained from Annual Survey of Industries for the year 2017-18, National Statistical Office, MOSPI (Annual Survey of Industries 2020). Link for reference: https://www.mospi.gov.in/asi-summary-results. • State-wise value added of aggregate manufacturing sector (organized + unorganized). The data is obtained from gross state value added by economic activities available at National Accounts Division, MOSPI. Link for reference: https://www.mospi.gov.in/data. • State-wise share of output and value added for each organized sector that has been used to disaggregate manufacturing sector output and value added of national SUT 2017-18. Disaggregated service sector across states using: • State-wise value added of service sectors. The data is obtained from gross state value added by economic activities available at the National Accounts Division, MOSPI. Link for reference: https://www.mospi.gov.in/data. • Further, disaggregation of service sector is done by using National Sample Survey Organisation (NSSO) 74th round survey report 2016/17, that is, ‘Technical Report on Services Sector Enterprises in India’ (NSSO 2019). Stage 2: Estimate Private Final Consumption Expenditure state level • Used NSSO 68th round survey report 2011/12 on households’ consumption expenditure, that is, ‘Household Consumption of Various Goods and Services in India 2011-12’ (NSSO 2014). This survey is also referred as HCES 2011/12. Stage 3: Estimate value added into payment for various types of labors and capitals • Used Periodic Labor Force Survey (PLFS) data 2017-18 (National Statistical office 2019) to disaggregate types of labor engaged in various activities across states. Stage 4: Estimate factor income distribution by households • Used NSSO 68th round survey report 2011/12, that is, ‘Employment and Unemployment Situation in India’ (NSSO 2014). Stage 5: Estimate government expenditure account • Used Comptroller and Auditor General of India (CAG) data on state governments revenue and expenditure. Stage 6: Transfer payments accounts • Used NSSO 64th round survey report on ‘Migration in India, 2007-08’ to obtain intra- households transfer for domestic remittances across states (NSSO 2010). • Used Reserve Bank of India data on international remittances receipt across states. Link for reference: https://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=17882. • Intra-government transfers obtained from CAG data. Intra-enterprise transfers are estimated using national accounts statistics data for the year 2017/18. The distribution of enterprise transfer across states is estimated using the ‘Technical Report on Services Sector Enterprises in India’ (NSSO 2019) and Annual Survey of Industries data (Annual Survey of Industries 2020). Stage 7: Taxes, Savings, and Investment • Used Planning Commission report on the ‘Estimation of Investment, its Composition and Trend for Twelfth Five Year Plan (2012-13 to 2016-17)’ to estimate the economic activity-wise Gross Fixed Capital Formation (GFCF) by states (Planning Commission 2012). • Commodity tax rates are obtained from national SUT 2017-18. https://www.mospi.gov.in/asi-summary-results https://www.mospi.gov.in/data https://www.mospi.gov.in/data https://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=17882 27 • Public finance statistics for government tax revenue and expenditure 2017-18 is used to disaggregate total commodity tax collection by states. Stage 8: Balancing State SAM • Minimizing entropy considering state level macroeconomic data as constraint. Commodities: National Accounts report GDP by expenditure group, i.e., private and public consumption, investment demand, and exports and imports. These groups were disaggregated across the Nexus commodities using the following data: • Six-digit COMTRADE and itemized BOPS data were used to disaggregate international goods and services trade, respectively. • The 68th round of National Sample Survey on household consumption expenditure for the year 2011/12 is a state-representative household survey that distinguishes between marketed and own consumption spending, and this information was used to disaggregate total private consumption spending across activities and commodities (NSSO 2014). • The Comptroller and Auditor General of India provided information on the breakdown of public consumption spending across public administration, health and social work, and education. This was updated using GDP estimates for public administration, education, and health. • Initial indirect tax rates were first estimated from the 2017/18 SUT of India and then adjusted using more recent data on tariffs and VAT collections by commodity. Rates were then scaled uniformly to match total revenues by tax instrument. • Transaction cost margins (as a share of commodity supply) were estimated from the 2017/18 SUT of India. Labor: The SUT separates sectoral GDP into compensation of employees, and gross operating surplus. Labor value-added was disaggregated using sector-level worker and household income shares derived from the 68th round of the National Sample Survey on household consumption expenditure 2011/12 (NSSO 2014) and employment and unemployment situation 2011/12 (NSSO 2014). This includes wage earnings, as well as farm and non-farm enterprise revenues. The latter were apportioned equally to individual household members based on their reported employment status and sector of employment. For example, if more than one household member reports being employed in agriculture, then each of these members is assigned an equal share of the households’ reported farm earnings. Households: Household incomes and expenditures were disaggregated across representative household groups using information from the 68th round of the National Sample Survey on household consumption expenditure 2011/12 (NSSO 2014). Households receive factor incomes based on reported earnings of individual household members. The value-added generated by crop land and livestock capital were paid to household groups based on their reported farm enterprise revenues. Direct tax payments were assumed to be proportional to secondary/tertiary-educated workers’ wage and non-farm enterprise earnings. Finally, transfers received from the government and the rest of the world were assigned to households using information from the 68th round of the National Sample Survey on employment and unemployment situation (NSSO 2014). More 28 specifically, the ratio of transfer earnings to total household consumption was used to estimate initial transfer incomes, and these were then scaled uniformly across all households to match the total value of transfers appearing in government and balance of payments statistics. The social accounting matrix for the state Uttar Pradesh is made available separately through the International Food Policy Research Institute’s open access data dissemination portal.7 However, for brevity, we present a macro-SAM of UP in the following Table 8. This macro-SAM is an empirical presentation of the standard Nexus Macro SAM framework of Indian state presented earlier in Table 1 of this document. As this SAM considers the monetary flow within the individual focus state Uttar Pradesh and with the rest of India (ROI), it is useful to analyze the economic situation of the focus state vis-a-vis ROI. Further, this SAM can be used as a balanced database for computable general equilibrium modeling to analyze the spillover effect of any federal and state specific policies on a focus state in comparison to the rest of India. A SAM multiplier model can also be developed to analyze the economic linkages between the economic activities, commodities, households, and other institutions for the focus state. This SAM is useful for value chain analysis as well and the available agrifood system factsheets published by the IFPRI researchers are some examples in this context.8 Now a glimpse of application of this state SAM is described in the following section. 6. Structure of the Uttar Pradesh Economy In this section, we have described the structure of the Uttar Pradesh economy along with rest of India using the data available in the state SAM. Here we have selected three key indicators to describe the structure of the economy – production structure, structure of households’ income, and households’ consumption expenditure. In Table 9, we have presented the production structure of UP and the rest of India. Sharing key economic activities on GVA of the state is crucial to understand the production structure of the state economy. As this table shows, the contribution of agriculture to UP’s GVA is around 24 percent, which is more than the average share of agriculture in ROI. The crop sub-sector plays a crucial role in the GVA contribution of agriculture sector in Uttar Pradesh and ROI. The livestock sub-sector is relatively more significant in Uttar Pradesh than ROI, contributing 7.2 percent to Uttar Pradesh’s GVA as compared to 4.9 percent in the case of rest of India. The table 9 also reveals that the livestock sector constitutes 1.2 percent of India’s total export and India is a net exporter of livestock since 4.3 percent of total output is being exported whereas the share imported to demand is 0.1 percent. This implies that any global demand shock in the livestock sector will affect the Indian economy in general and the Uttar Pradesh economy in particular. The contribution of the industry sector to UP and ROI's GVA is between 28 and 29 percent, primarily driven by the manufacturing and construction sectors. Regarding the services sector, its contribution to UP’s GVA is relatively lower than its contribution to the ROI’s GVA. Further, the public administration services play a significant role in UP's GVA, whereas the contributions of 7 Please follow this link get updates on SAM databases: https://www.ifpri.org/publication/ifpri-datasets-dataverse 8 https://www.ifpri.org/publication/agrifood-system-india-state-factsheet-uttar-pradesh https://www.ifpri.org/publication/ifpri-datasets-dataverse 29 health and education services are relatively lower in comparison to their contribution in ROI’s GVA (see Table 9). The structure of household income for UP and the ROI is presented in Table 10. A perusal of Table 10 reveals that the rural households in UP earns 25.7 percent from labor, 7.6 percent from crop land and 52.8 percent from the capital.9 In the case of urban households, about 45 percent of their income originates from the labor supply followed by 28.1 percent from capital and 4.7 percent from the crop land. Similar structure of income is observed for the rest of India. In table 10, we have also classified the labor into three categories – low educated, medium educated and high educated. This classification corresponds with low skilled, medium skilled and high skilled labor. It is observed that the low skilled labor income is a major source of income of the bottom quintile people in both UP and rest of India. In contrast, high skilled labor income is a key source for the rich people (top quintile households). Further, the share of government transfer in households’ income stands at 12.4 percent in UP as against 9.5 percent in ROI. Also, the share of government transfer in the income of urban households is more than its share in the rural households’ income in both Uttar Pradesh and ROI. In UP, 20.5 percent of the income of the urban households is obtained through transfer from government as compared to 5.9 percent for the rural households. The contribution of government transfer in households’ income is higher for the upper quintile households than the lower quintile households in UP. This information is useful for detailed analysis of government cash transfer programs in the state and hence, a useful policy insight can be drawn from the SAM based analysis. Apart from income, household income distribution and expenditure pattern are also crucial indicators to understand the state of an economy. The state SAM provides useful insights on these indicators, which are presented in table 11. It is observed from the table that 16.5 percent of India’s total population is living in UP, where rural population constitutes 13 percent, and the urban population constitutes 3.5 percent of the India’s total population. Further, the bottom two quintile households of UP occupy 9.6 percent share (that is, 5.3 percent in quintile 1 and 4.3 percent in quintile 2) of India’s population. The per capita consumption expenditure of the households in Uttar Pradesh is Rs. 38.9 thousand per annum as compared to Rs. 83.7 thousand in ROI. Further, the per capita spending of the bottom 20 percent population (that is, Rs. 17.7 thousand per annum for quintile 1 in Table 11) is almost 8 times lower than the per capita spending of the top 20 percent people in UP. Hence, we can argue that UP is largely a rural economy with a high incidence of poverty and income inequality. Table 11 also reveals the fact that the share of spending on food is lower for the rich people than for the poor people in both UP and ROI. This phenomenon corroborates the Engel law that states that with the rise in income, the share of food consumption falls for the households. Finally, the savings rate presented in this table shows a positive relation with the income of the households. It is therefore evident from the above presentation that a state SAM provides a wide range of information regarding socio-economic structure of an economy, and thus useful for the national and sub-nation level policy impact analysis. 9 Capital income of the households includes income of the self-employed and own account workers. 30 Table 8: Macro SAM for Uttar Pradesh State in India in 2017/18 (Billions of Rupees) Activi- ties Factors Enterpri- ses House- holds Govern- ment Activi- ties Factors Enterpri- ses House- holds Govern- ment Commo- dities Taxes Savings World Total Uttar Pradesh Uttar Pradesh Uttar Pradesh Uttar Pradesh Uttar Pradesh Rest of India Rest of India Rest of India Rest of India Rest of India National Market National Market National Market National Market National Market Activi- ties Uttar Pradesh 478 21,752 22,231 Factors Uttar Pradesh 13,217 26 13,242 Enterpri- ses Uttar Pradesh 6,029 390 662 462 10 74 7,625 House- holds Uttar Pradesh 7,201 4,150 588 1,710 109 31 13,787 Govern- ment Uttar Pradesh 334 157 366 2,803 398 4,059 Activi- ties Rest of India 1,802 281,254 283,057 Factors Rest of India 142,399 262 142,661 Enterpri- ses Rest of India 9 76,235 4,902 8,328 3,683 923 94,081 House- holds Rest of India 65 66,291 51,536 4,179 12,886 734 135,692 Govern- ment Rest of India 3,215 1,187 3,373 22,615 3,281 33,670 Commo- dities National Market 9,105 8,221 1,722 140,984 92,687 16,615 65,944 55,164 31,810 422,251 Taxes National Market -91 419 563 -326 5,169 3,841 15,844 25,418 Savings National Market 2,104 3,053 -234 26,509 23,560 -3,211 3,383 55,164 World National Market 13 220 33 135 2,740 325 37,456 40,922 Total National Market 22,231 13,242 7,625 13,787 4,059 283,057 142,661 94,081 135,692 33,670 422,251 25,418 55,164 40,922 31 Table 9: Structure of Production in Uttar Pradesh State (2017/18) Share of total (%) Exports/ output (%) Imports/ demand (%) Gross Value Added Exports Imports Uttar Pradesh Rest of India All India All India All India All India All sectors or commodities 100 100 100 100 10.5 10.5 Agriculture 23.9 18.1 6.4 2.2 6.2 1.9 Crops 15.0 10.4 3.5 1.9 5.8 2.9 Livestock 7.2 4.9 1.2 0.0 4.3 0.1 Forestry 1.3 1.5 0.3 0.2 3.9 2.6 Fisheries 0.4 1.3 1.3 0.0 19.4 0.1 Industry 28.1 29.0 58.5 77.1 12.6 15.2 Mining 1.5 2.4 8.8 32.5 43.7 62.9 Manufacturing 13.9 16.4 49.6 44.3 16.0 12.9 Processed foods 2.1 1.2 2.8 2.9 5.6 5.7 Beverage and tobacco 0.8 0.3 0.1 0.1 3.7 2.4 Textiles, clothing, and footwear 1.7 2.1 8.5 1.3 24.6 3.5 Wood and paper products 0.9 0.7 0.4 1.4 4.2 11.6 Chemicals and petroleum 2.4 4.4 12.5 14.8 16.3 17.7 Non-metal minerals 0.8 1.1 3.2 0.7 23.7 5.0 Metals and metal products 1.1 2.2 12.3 4.6 26.6 10.6 Machinery, equipment, and vehicles 3.0 3.8 8.7 13.9 13.8 17.3 Other manufacturing 1.0 0.6 1.1 4.6 8.1 25.7 Electricity, gas, and steam 2.0 2.3 0.0 0.1 Water supply and sewage 0.5 0.5 Construction 10.2 7.4 0.1 0.3 0.1 0.4 Services 48.0 52.9 35.1 20.7 9.1 6.2 Wholesale and retail trade 9.0 10.9 Accommodation and food services 0.5 1.0 3.0 19.5 Transportation and storage 5.2 4.8 0.5 3.0 1.0 6.6 Information and communication 2.0 1.7 0.7 0.3 3.8 1.6 Finance and insurance 3.3 5.6 7.2 1.4 19.6 5.1 Real estate activities 6.1 7.1 Business services 7.5 7.9 26.2 12.4 41.2 26.0 Public administration 9.0 5.8 0.2 0.2 0.5 0.5 Education 2.8 4.2 Health and social work 1.1 1.6 Other services 1.5 2.3 0.3 0.5 1.7 2.9 Source: 2017/18 India State SAM prepared by the authors. 32 Table 10: Household Income Sources in Uttar Pradesh State (2017/18) Share of total household income (%) Labor by education level Crop land Capital Transfers Total All workers Low educated Medium educated High educated All Agri- culture Non- agriculture Household Govern- ment World All households Uttar Pradesh 34.2 6.4 2.8 25.0 6.3 41.8 11.7 30.1 5.1 12.4 0.2 100 Quintile 1 Uttar Pradesh 31.3 17.1 4.5 9.7 7.9 51.3 12.6 38.7 6.8 2.3 0.3 100 Quintile 2 Uttar Pradesh 28.4 10.7 3.4 14.3 7.2 54.6 16.6 38.1 6.1 3.4 0.3 100 Quintile 3 Uttar Pradesh 29.9 7.1 4.2 18.7 7.6 50.0 17.4 32.6 6.3 5.8 0.3 100 Quintile 4 Uttar Pradesh 30.5 4.1 2.3 24.2 7.3 46.4 13.0 33.4 5.2 10.4 0.2 100 Quintile 5 Uttar Pradesh 42.3 0.9 1.4 40.0 4.1 25.1 5.4 19.7 3.2 25.2 0.1 100 Rural households Uttar Pradesh 25.7 8.2 3.0 14.4 7.6 52.8 20.6 32.2 7.7 5.9 0.3 100 Urban households Uttar Pradesh 44.8 4.1 2.5 38.2 4.7 28.1 0.7 27.4 1.8 20.5 0.1 100 All households Rest of India 35.4 6.2 2.8 26.4 5.2 46.3 8.3 38.0 3.1 9.5 0.5 100 Quintile 1 Rest of India 29.7 17.1 3.8 8.8 7.6 53.5 10.9 42.7 4.4 4.5 0.2 100 Quintile 2 Rest of India 30.4 14.3 4.1 11.9 6.7 53.5 11.8 41.8 4.0 5.1 0.3 100 Quintile 3 Rest of India 29.0 10.2 4.2 14.7 6.5 55.0 12.9 42.1 3.6 5.4 0.4 100 Quintile 4 Rest of India 30.4 6.6 3.3 20.6 5.7 53.9 9.9 44.0 3.1 6.4 0.5 100 Quintile 5 Rest of India 40.9 2.3 1.9 36.7 4.1 38.4 5.4 33.0 2.7 13.3 0.7 100 Rural households Rest of India 28.4 8.5 3.2 16.7 6.9 54.3 16.5 37.8 4.6 5.1 0.7 100 Urban households Rest of India 42.1 3.9 2.5 35.7 3.5 38.6 0.4 38.2 1.7 13.8 0.4 100 Source: 2017/18 India State SAM prepared by the authors. Notes: Labor is separated by the maximum level of education achieved: “low educated” workers have not finished primary schooling (i.e., 0-6 years of schooling); “medium educated” workers have finished primary schooling, but not finished secondary schooling (i.e., 7-11 years of schooling); and “high educated” workers have finished secondary or tertiary schooling (12+ years of schooling). 33 Table 11: Household Populations and Expenditures in Uttar Pradesh State (2017/18) Source: 2017/18 India State SAM prepared by the authors. Notes: Expenditures are annual. Consumption spending includes spending on goods and services. Total spending is consumption spending plus taxes, savings, and outward remittances. Population Consumption spending Total spending People Millions Share of total (%) Share of total (%) Per capita (1000 Rupees) Food share (%) Per capita (1000 Rupees) Savings rate (%) All households Uttar Pradesh 223.7 16.5 100.0 38.9 36.7 61.6 22.1 Quintile 1 Uttar Pradesh 72.0 5.3 14.6 17.7 47.6 26.3 17.0 Quintile 2 Uttar Pradesh 58.5 4.3 17.8 26.5 45.9 40.2 18.4 Quintile 3 Uttar Pradesh 43.4 3.2 17.2 34.4 40.7 52.9 20.0 Quintile 4 Uttar Pradesh 28.9 2.1 18.2 54.8 35.5 86.9 21.6 Quintile 5 Uttar Pradesh 20.9 1.5 32.2 134.2 25.2 226.5 27.4 Rural households Uttar Pradesh 176.0 13.0 58.5 28.9 42.6 43.4 19.7 Urban households Uttar Pradesh 47.7 3.5 41.5 75.7 28.4 128.8 25.2 All households Rest of India 1,128.9 83.5 100.0 83.7 33.3 120.2 17.4 Quintile 1 Rest of India 198.6 14.7 5.7 27.3 50.4 37.3 10.8 Quintile 2 Rest of India 212.1 15.7 9.1 40.4 46.3 55.9 13.3 Quintile 3 Rest of India 227.0 16.8 13.9 57.7 41.7 81.2 15.2 Quintile 4 Rest of India 241.5 17.9 22.4 87.5 37.0 125.9 16.6 Quintile 5 Rest of India 249.6 18.5 49.0 185.4 24.8 270.7 19.7 Rural households Rest of India 790.2 58.4 50.3 60.1 39.8 84.2 15.8 Urban households Rest of India 338.7 25.0 49.7 138.7 26.7 204.2 18.9 34 References Annual Survey of Industries. 2020. 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Detailed Classification of Standard Nexus (42) Activity Accounts Nexus Activity International Standard Industrial Classification (ISIC) Revision 4 Code Description Code Description maiz Maize 0111 Growing of cereals (except rice), leguminous crops and oil seeds rice Rice 0112 Growing of rice ocer Other cereals 0111 Growing of cereals (except rice), leguminous crops and oil seeds puls Pulses 0111 Growing of cereals (except rice), leguminous crops and oil seeds oils Oilseeds 0111 Growing of cereals (except rice), leguminous crops and oil seeds root Roots 0113 Growing of vegetables and melons, roots and tubers vege Vegetables 0113 Growing of vegetables and melons, roots and tubers sugr Sugarcane 0114 Growing of sugar cane toba Tobacco 0115 Growing of tobacco cott Cotton and fibers 0116 Growing of fiber crops frui Fruits and nuts 0121 Growing of grapes 0122 Growing of tropical and subtropical fruits 0123 Growing of citrus fruits 0124 Growing of pome fruits and stone fruits 0125 Growing of other tree and bush fruits and nuts 0126 Growing of oleaginous fruits coff Coffee, tea, and cocoa 0127 Growing of beverage crops ocrp Other crops 0119 Growing of other non-perennial crops 0128 Growing of spices, aromatic, drug and pharmaceutical crops 0129 Growing of spices, aromatic, drug and pharmaceutical crops 0130 Plant propagation 0161 Support activities for crop production 0163 Post-harvest crop activities 0164 Seed processing for propagation catt Cattle and raw milk 0141 Raising of cattle and buffaloes poul Poultry and eggs 0146 Raising of poultry oliv Other livestock 0142 Raising of horses and other equines 0143 Raising of camels and camelids 0144 Raising of sheep and goats 0145 Raising of swine/pigs 0149 Raising of other animals 0162 Support activities for animal production 0170 Hunting, trapping and related service activities fore Forestry 02xx Forestry and logging fish Fishing 03xx Fishing and aquaculture mine Mining 05xx Mining of coal and lignite 06xx Extraction of crude petroleum and natural gas 07xx Mining of metal ores 08xx Other mining and quarrying 09xx Mining support service activities food Food processing 101x Processing and preserving of meat 102x Processing and preserving of fish, crustaceans and mollusks 103x Processing and preserving of fruit and vegetables 104x Manufacture of vegetable and animal oils and fats 105x Manufacture of dairy products 106x Manufacture of grain mill products, starches and starch products 107x Manufacture of other food products 108x Manufacture of prepared animal feeds beve Beverage and tobacco 11xx Manufacture of beverages 12xx Manufacture of tobacco products text Textiles, clothing and footwear 13xx Manufacture of textiles 14xx Manufacture of wearing apparel 15xx Manufacture of leather and related products wood Wood and paper products 16xx Manufacture of wood and of products of wood and cork, except furniture 17xx Manufacture of paper and paper products 18xx Printing and reproduction of recorded media chem Chemicals and petroleum 19xx Manufacture of coke and refined petroleum products 20xx Manufacture of chemicals and chemical products (excl. 2012 and 2021 above) 21xx Manufacture of basic pharmaceutical products and pharmaceutical preparations 22xx Manufacture of rubber and plastics products nmet Non-metal minerals 23xx Manufacture of other non-metallic mineral products 37 Table A1 (continued). Detailed Classification of Standard Nexus (42) Activity Accounts Nexus Activity International Standard Industrial Classification (ISIC) Revision 4 Code Description Code Description metl Metals and metal products 24xx Manufacture of basic metals 25xx Manufacture of fabricated metal products, except machinery and equipment mach Machinery, equipment and vehicles 26xx Manufacture of computer, electronic and optical products 27xx Manufacture of electrical equipment 28xx Manufacture of machinery and equipment 29xx Manufacture of motor vehicles, trailers and semi-trailers 30xx Manufacture of other transport equipment oman Other manufacturing 31xx Manufacture of furniture 32xx Other manufacturing 33xx Repair and installation of machinery and equipment elec Electricity, gas and steam 35xx Electricity, gas, steam and air conditioning supply watr Water supply and sewage 36xx Water collection, treatment and supply 37xx Sewerage 38xx Waste collection, treatment and disposal activities; materials recovery cons Construction 41xx Construction of buildings 42xx Civil engineering 43xx Specialized construction activities trad Wholesale and retail trade 45xx Wholesale and retail trade and repair of motor vehicles and motorcycles 46xx Wholesale trade, except of motor vehicles and motorcycles 47xx Retail trade, except of motor vehicles and motorcycles tran Transportation and storage 49xx Land transport and transport via pipelines 50xx Water transport 51xx Air transport 52xx Warehousing and support activities for transportation 53xx Postal and courier activities hotl Accommodation and food services 55xx Accommodation and food services 56xx Food and beverage service activities comm Information and communication 58xx Publishing activities 59xx Motion picture, video, TV program production, sound and music publishing 60xx Programming and broadcasting activities 61xx Telecommunications 62xx Computer programming, consultancy and related activities 63xx Information service activities fsrv Finance and insurance 64xx Financial service activities, except insurance and pension funding 65xx Insurance, reinsurance and pension funding, except compulsory social security 66xx Activities auxiliary to financial service and insurance activities real Real estate activities 68xx Real estate activities bsrv Business services 69xx Legal and accounting activities 70xx Activities of head offices; management consultancy activities 71xx Architectural and engineering activities; technical testing and analysis 72xx Scientific research and development 73xx Advertising and market research 74xx Other professional, scientific and technical activities 75xx Veterinary activities 77xx Rental and leasing activities 78xx Employment activities 79xx Travel agency, tour operator, reservation service and related activities 80xx Security and investigation activities 81xx Services to buildings and landscape activities 82xx Office administrative, office support and other business support activities padm Public administration 84xx Public administration and defense; compulsory social security educ Education 85xx Education heal Health and social work 86xx Human health activities 87xx Residential care activities 88xx Social work activities without accommodation osrv Other services 90xx Creative, arts and entertainment activities 91xx Libraries, archives, museums and other cultural activities 92xx Gambling and betting activities 93xx Sports activities and amusement and recreation activities 94xx Activities of membership organizations 95xx Repair of computers and personal and household goods 96xx Other personal service activities 97xx Activities of households as employers of domestic personnel 98xx Undifferentiated goods/service activities of private households for own use 99xx Activities of extraterritorial organizations and bodies 38 Source: UNDESA (2008) Table A2. Detailed Classification of Standard Nexus Agricultural Activity Accounts Code Description (FAOSTAT crop and livestock product codes in parentheses) maiz Maize (56) rice Paddy rice (27) ocer Wheat (15); Barley (44); Rye (71); Oats (75); Millet (79); Sorghum (83); Buckwheat (89); Quinoa (92); Fonio (94); Triticale (97); Canary seed (101); Mixed grain (103); Cereals not elsewhere specified (108) puls Dry beans (176); Dry broad beans and horse beans (181); Dry peas (187); Chick peas (191); Dry cow peas (195); Pigeon peas (197); Lentils (201); Bambara beans (203); Vetches (205); Lupins (210); Pulses not elsewhere specified (211) oils Soybeans (236); Groundnuts with shell (242); Coconuts (249); Palm oil fruit (254); Palm kernels (256); Palm oil (257); Olives (260); Karite nuts (sheanuts) (263); Castor oil seed (265); Sunflower seed (267); Rapeseed (270); Tung nuts (275); Jojoba seed (277); Safflower seed (280); Sesame seed (289); Mustard seed (292); Poppy seed (296); Melonseed (299); Tallowtree seed (305); Vegetable tallow (306); Stillingia oil (307); Cottonseed (329); Linseed (333); Hempseed (336); Oilseeds not elsewhere specified (339) root Potatoes (116); Sweet potatoes (122); Cassav