The present paper discusses some important issues involved in estimation of state
income originating in the registered manufacturing sector with illustrations drawn
from Gujarat. It highlights the present practices in preparing quick estimates for
latest years when results from the regular data source of Annual Survey of Industries
is not finalized. It also argues that the current practice of following single deflation
method is inadequate and misleading for deriving estimates of value addition at
constant prices in this sector. When the industrial structure and technology are
rapidly changing with substantial differences in price trends of inputs and outputs,
double deflation is the right method to serve the purpose. The paper also draws
attention to micro-level inconsistencies and unexplained jumps in annual estimates
of input – output ratios obtained from the ASI results. Finally, the paper points out
the serious flaw of gathering information in ASI without updating regularly the
Census sector frame at the state level. It results in ignoring new large and medium
manufacturing units from the ASI results. It is shown for Gujarat state that more
than 1000 such units remain uncovered by ASI resulting in the serious
underestimation of vale addition of about 23%. This is likely to be a widespread
phenomenon not confined only to Gujarat. Urgent action to address these problems
will go a long way to improve quality and credibility of the estimates.