Conventionally, the growth rates in aggregate GSDP (gross state domestic product) put out by the states and the national GDP growth estimated by the Centre used to differ by a small measure, but the variance has become puzzlingly large in the last two-to-three years. In FY13, for instance, the aggregate GSDP growth rate was reported at 6.8%, an inexplicable 2.33 percentage points higher than the national GDP expansion of 4.47% estimated by the Central Statistics Office (CSO).
Available GSDP growth data from 22 states and union territories for FY14 also suggest the gap between the two sets of data could be irreconcilable, which is 1.84 percentage points. Of course, the bases for the two — aggregate GSDP and national GDP — are not exactly the same, with the latter being a bit bigger, as it includes supra-regional sectors like railways. For instance, the national GDP (at constant prices) was estimated at Rs 54,82,111 crore in FY13 and the comparable aggregate GSDP at Rs 53,47,632 crore.
Yet, analysts were finding it difficult to explain the increased gap between the two growth figures.
The GSDP data is collected by the directorate of economics and statistics (DES) of respective states, while the CSO collects the data from various sources and collates the national GDP data.
“Data flows from two directions. In case of agriculture, states send the data to the Centre. If there is a large gap between a state’s figures and agriculture ministry data, the later is taken into account. The IIP (index of industrial production) is the basis of industrial growth. Some states have their own IIP, while other states factor in the Centre’s (CSO) IIP,” explained Pronab Sen, chairman of National Statistical Commission and a former chief statistician of the central government.
Is there deliberate overstatement of GSDP data by some states? The question is relevant given that state GDP projections determine not only their revenue growth and fiscal situation, but their borrowing ability as well. “A higher GDP growth enhances the borrowing limit (for states). While the (high-growth) states may not always borrow more, they could project a better fiscal targeting,” said Madan Sabnavis, chief economist at Care Ratings.
Sen said a higher GDP projection by a state could also be a negative for it as the central assistance through budgetary allocations in a particular year could come down as a result. However, eventually these allocations even out as Plan allocations follow the Gadgil-Mukherjee