An Odd Divergence between India and its Constituents

Context: A divergence is observed between Gross State Domestic Product(GSDP) and Gross Domestic Product (GDP) of India, which will have implications on public policy.

Issues with Economic data in India:

• Divergence in national and states’ growth: While the divergence between GSDP and GDP was mere 0.3% between 2012-2019, it increased to 2.7% in 2019-20.

• Seven of the states namely Tamil Nadu, Haryana, West Bengal, Sikkim, Bihar, Madhya Pradesh and Andhra Pradesh recorded higher growth in 2019-20 than the previous year.

• Inadequate data collection: States only release yearly data of their GSDP and not quarterly data and do not provide breakdown of GSDP in consumption and investment.

• The National Statistical Agency (NSA) allocates the corporate output data on railways, financial institutions, defence and public administration to respective State which account for 60% of total GSDP for most states.

• High share of informal sector: The overall share in GDP of households and non-profit institutions serving households, which is the informal sector, has been around 45%.

• Lack of expertise: National Sample Survey Organization (NSSO) lacks expert capacity to supervise the survey used by states which makes data robustness hard to ensure.

Conclusion: While the Informal sector should be provided with a stimulus package, the 15th Finance commission should clear the air regarding which data series to be used- GSDP or Central Statistics office (CSO) data.