13-March-2025-Editorial

DISTRICT DOMESTIC PRODUCT (DDP) ESTIMATION IN INDIA

India has primarily assessed its economic growth through national and state-level GDP estimates, often neglecting district-level economic performance. Recognizing this gap, the government is now focusing on District Domestic Product (DDP) estimation to enhance localized development strategies.

Prime Minister Narendra Modi has emphasized the need to assess district-wise contributions to achieve the USD 5 trillion economy target.

Current GDP Estimation Methodology

Existing Approach:

• India estimates GDP using a combination of top-down and bottom-up approaches based on the sector.
• Primary sector (agriculture, forestry, fishing, mining): Follows a bottom-up approach, aggregating data from the district level.
• Secondary and tertiary sectors (manufacturing, construction, services, trade, banking): Follow a top-down approach, where national GDP is allocated to states and districts using indirect indicators like employment levels and infrastructure availability.

Limitations of Current Methodology:

• Lacks granularity: District-level sectoral strengths are overlooked, especially in industries and services.
• Data Gaps: Unorganized sectors, including unpaid labor (especially by women), are underrepresented.
• Inaccuracies in real-time assessment: Economic variations within districts are not captured effectively.
• Employment link missing: There is a weak link between GDP growth and employment at the national level, and this issue is even more pronounced at the district level.

Case Study: Uttar Pradesh & COVID-19

• During the COVID-19 pandemic, MoSPI applied a uniform GDP reduction model, leading to discrepancies.
• Uttar Pradesh (UP) objected, arguing that its economy, heavily dependent on agriculture (25% of GSVA, with 65% workforce in the sector), was less affected than industrial states.
• A one-size-fits-all approach exaggerated UP’s GDP decline, highlighting the need for district-specific GDP estimation.

Challenges in Implementing District-Level GDP Estimation

1. Dominance of the Informal Sector

• A significant part of India’s workforce operates in the unorganized sector, making data collection difficult.
• Economic activities and transactions often flow across district boundaries, complicating local GDP assessment.

2. Financial and Logistical Barriers

• Requires large investments in statistical infrastructure, training, and technology.
• Strengthening district statistical offices demands additional funding and workforce expansion.

3. Inconsistent Data Collection

• Lack of uniformity between Centre and States as statistics fall under the Concurrent List.
• Different states have decentralized statistical systems, leading to inconsistent data collection methods.

4. Absence of Standardized Methodology

• Unlike System of National Accounts (SNA) 2008, there is no universally accepted framework for DDP estimation.
• Economic activities differ across districts, making defining key metrics like base year and output measurement challenging.

5. Political and Administrative Hurdles

• States are responsible for compiling sub-state/DDP data, but execution is often weak.
• Variations in state policies and political priorities cause delays and inconsistencies.

Benefits of District-Level GDP Estimation

1. Strengthening Fiscal Federalism

• Decentralized data allows district authorities to create region-specific economic strategies.
• Enables better allocation of resources and targeted investment planning.

2. Accurate Economic Analysis

• Helps policymakers understand how state and national policies impact different districts.
• Ensures real-time tracking of economic trends at the district level.

3. Promoting Equitable Growth

• Highlights growth disparities between districts and ensures rural and underdeveloped areas are not left behind.
• Assists in designing inclusive policies.

4. Enhancing Policy Reforms

• The 15th Finance Commission recommended performance-based grants for local governance; district GDP data can help in effective allocation.
• Helps in formulating state-level policies based on ground-level economic performance.

Way Forward:

1. Pilot Projects for District GDP Estimation

• Begin with a pilot project in economically diverse districts.
• Successful models can be scaled up to other regions.
• Example: Assam-Pahle India Foundation MoU to develop district vision documents.

2. Strengthening Local Data Collection

• Enhance district statistical offices with skilled personnel.
• Improve coordination between Central and State agencies to maintain data consistency.
• Investment in data collection: Studies suggest that every USD 1 spent on data yields USD 32 in development benefits.

3. Real-Time Economic Indicators

• Align with Sub-National Accounts Committee’s recommendations to improve district GDP tracking.
• Develop district economic dashboards with real-time data on employment, business activities, and credit growth.
• Utilize digital tools like AI, satellite imagery, and big data analytics for accurate assessment.

4. Expanding the Role of MoSPI

• The Ministry of Statistics and Programme Implementation (MoSPI) should oversee uniformity and comparability in DDP estimation across states.
• Focus on capacity building and technical training for local statistical agencies.

Conclusion

India’s economic aspirations, including the USD 5 trillion economy target, require a robust and detailed assessment of economic activity at the district level. Implementing District Domestic Product (DDP) estimation will help in designing localized policies, ensuring balanced growth, and enhancing fiscal planning. Strengthening data collection, leveraging technology, and fostering collaboration between states, research institutions, and the Centre will be key to achieving accurate and effective district-level economic assessments.