Context

In FY22, nine states surpassed pre-Covid GSDP levels.

Gross State Domestic Product (GSDP)

  • The Gross State Domestic Product (GSDP) or State Income is the most essential indicator of a state's economic progress.
  • Gross State Domestic Product (GSDP) is a monetary measure of the sum total volume of all finished goods and services produced within the geographical boundaries of the State for a particular period of time, usually a year, and accounted for without duplication.
  • Compiling GSDP/NSDP is comparable to compiling GDP/NDP for the entire economy in that it measures the volume, in monetary terms, the total value of goods and services produced within the state's geographical limit.
  • To calculate NSDP, subtract the consumption of fixed capital (CFC) from the gross state domestic product (GSDP).
  • Consumption of Fixed Capital (CFC) is the value of fixed capital utilized during the manufacturing process. It is computed based on the fixed asset's life expectancy.

Methods for calculating GSDP

  • Individual sector-wise (17-sector) Gross Value Added (GVA) is estimated on a 2004-05 basis using the methods provided by the Central Statistics Office (CSO).
  • GVA estimation procedures vary per industry. The Production Approach calculates five sectors (agriculture and animal husbandry, forestry, fishing, mining and quarrying, and registered manufacturing).
  • Construction is calculated using the Expenditure Approach.
  • The remaining sectors (Unregistered Manufacturing, Electricity, Gas & Water Supply, Trade, Hotel & Restaurant, Railway, Other Means of Transport, Storage, Communication, Banking & Insurance, Real Estate, Ownership of Dwellings & Business Services, Public Administration, and Other Services) are determined by calculating using the Income Approach.

An Approach to Production

The value of output is calculated in this approach by multiplying the quantity of production by the prices received by the producer. The value of intermediate consumption, services purchased from other sectors, and taxes paid are then subtracted to calculate Gross Value Added (GVA).

An Approach to Expenditure

The total expense incurred during the production process is treated as the value of output in this approach. The cost of commodities utilized, services obtained from other industries, and taxes paid are then subtracted to arrive at Gross Value Added (GVA).

The Income Approach

The amount of income accrued to the various components of production is treated as Net Value Added in this approach (NVA). GVA is calculated by adding the amount of consumption of fixed capital (CFC).

Gross State Domestic Product is the sum of the state's sector-specific Gross Value Added (GVA) (GSDP).

GSDP = ∑GVA (Gross Value Added)

NSDP = ∑NVA (Net Value Added)

NVA = GVA – CFC (Consumption of Fixed Capital)

NSDP/Mid-year Population = Per Capita NSDP

Current Price and Constant Price GSDP

The estimated GSDP for an accounting year is calculated at current prices. When its value is compared across time, it is influenced not just by changes in output but also by price variations. To compare production across time, it is required to remove the influence of price inflation. This is accomplished by computing the value of GSDP at a given base year price. The resulting GSDP is known as GSDP at constant prices. This provides a measure of the economy's true growth.

At Factor Cost, GSDP:

GVA estimations by sector are known as GSDP at Factor Cost. Individual GVA is calculated without taking into account taxes or subsidies.

GSDP at Basic Price

GSDP at factor cost + Production Tax – Production Subsidies = GSDP at Basic Price

Market Price GSDP

GSDP at Basic Price + Product Tax – Product Subsidies = GSDP at Market Price.

The denominator factor in the calculation of the Fiscal Deficit to Total GSDP is the GSDP at Market Price.

Source: IE