Gross State Domestic Product (GSDP)

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Context

• 9 states crossed pre-Covid GSDP levels in FY22.

Gross State Domestic Product (GSDP)

• Gross State Domestic Product (GSDP) or State Income is the most important indicator for measuring the economic growth of a State.
• Gross State Domestic Product (GSDP) is a measure in monetary terms, the sum total volume of all finished goods and services produced during a given period of time, usually a year, within the geographical boundaries of the State, accounted without duplication.
• Compilation of GSDP/NSDP is similar to that of compiling GDP/NDP of the entire economy i.e. measuring the volume in monetary terms, the total value of goods and services produced within the geographical boundary of the state.
• From Gross State Domestic Product (GSDP), the Consumption of Fixed Capitals (CFC) is deducted to arrive at NSDP i.e. NSDP = GSDP – CFC
• Consumption of Fixed Capital (CFC) is the value of fixed capital which is consumed during the process of production. It is calculated on the basis of life span of the fixed asset.

Approaches for measurement of GSDP

• In the 2004-05 base, individual sector wise (17 sectors) Gross Value Added (GVA) are calculated as per the methodology supplied by Central Statistics Office (CSO).
• Sector wise GVA estimation methodologies are different. Five sectors (Agriculture & Animal Husbandry, Forestry, Fishery, Mining & Quarrying and Registered Manufacturing) are calculated in Production Approach.
• The Construction sector is calculated in Expenditure Approach.
• Rest of the sectors (Un-Registered Manufacturing, Electricity, Gas & Water Supply, Trade, Hotel & Restaurant, Railway, Transport by Other means, Storage, Communication, Banking & Insurance, Real Estate, Ownership of Dwellings & Business Services, Public Administration and Other Services) are calculated in Income Approach.

Production Approach

In this Approach value of output is calculated by multiplication of quantity of production and the prices received by the producer. Then the value of intermediate consumption, services purchased from other sector and taxes paid are deducted to arrive at Gross Value Added (GVA).

Expenditure Approach

In this Approach the total expenditure incurred during the process of production are treated as value of output. Then the value of materials used, services purchased from other sectors and taxes paid are deducted to arrive at Gross Value Added (GVA).

Income Approach

 In this Approach the amount of Income accrued to the various factors of productions are treated as Net Value Added (NVA). The amount of consumption of fixed capitals (CFC) is added to arrive at GVA.

Sum total of sector wise Gross Value Added (GVA) of the State is known Gross State Domestic Product (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

GSDP at Current Price and Constant Price

GSDP estimated for an accounting year is measured at current price. When its value is compared over years, it is affected by not only the changes in production but also by the changes in prices. Therefore, it is necessary to eliminate the effect of price inflation to compare the production over the years.  This is done by calculating the value of GSDP at particular base year price. The GSDP thus obtained is known as GSDP at constant prices. This gives a measure of the real growth of the economy.

GSDP at Factor cost

Sector wise GVA estimates is known as GSDP at Factor Cost. No taxes and subsidies are taken into consideration while calculating individual GVA.

GSDP at Basic Price

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

GSDP at Market Price

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

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

https://indianexpress.com/article/india/19-states-cross-pre-covid-gsdp-levels-in-fy22-kerala-up-lag-8103825/