States grow much faster than national growth rate

‘Some States can be deliberately over-stating their GSDP’

The economic slowdown is not reflecting in the growth rates of the States, data on which was released by the Central Statistics Office (CSO) earlier this month. Sixteen of the 17 non-Special Category States grew faster than the rate at which the all-India gross domestic product (GDP) grew in 2012-13.

The weighted growth rates for Gross State Domestic Product (GSDP) of States add up to 6.84 per cent for 2012-13, according to the CSO data. The National GDP growth rate is 4.47 per cent. The gap between the national growth rate and that of the sum of all States is unusually wide, highly-placed government sources told The Hindu . “Where is the slowdown if the States are all growing so much faster than the national growth rate,” asked a top Finance Ministry source.

Normally, the States GDP adds up to about 90 per cent of the national GDP. The difference is the output of the sectors that do not belong to any State such as the Bombay High.

“The Finance Ministry, it seems, suspects that some States could also be deliberately over-stating or inflating their GSDP and has requested the CSO to validate the States’ data as early as possible,” said the sources. The Finance Ministry is dependent on the GSDP data for pegging the annual borrowing limits for each State.

Data validation

The GSDP data is prepared and then submitted by the State Directorates of Statistics to the CSO. After which the CSO validates the data. Normally, the data undergoes significant changes post-validation. The validated data becomes available after a lag of about two years.

“It is possible that the reason for the unusually high gap between the sum of the States and the national growth rate is that some States want to show higher growth rates than all the others,” said the sources. “There could be competition between States, especially in an election year.”

On the technical level, the concern the CSO has was, said the sources, whether the States were following the correct methodology for preparing these estimates and making projections; not the projections and estimates themselves. Major source of over-estimation in the States’ data is the data on the agricultural produce for which estimates are revised over several rounds through a year.