When economic activity at the district level is into account, it distorts our understanding or Regional and wrong development The allocation of public resources | Photo credit: handy kumar
Each policy, budget and economic prognosis is based on a fundamental number: the gross domestic product (GDP). But what if that number is wrong? What happens if we have a bone underestimating the true size of the economy of India for years, especially at the local level? Despite our national obsession with growth, the methods we use to calculate GDP, particularly at the district level, are outdated, high level and blind to ground realities. In this article, we explore how the recent evidence of Uttar Pradesh reveals mass discrepancies between the economic production reported and real and we argue that it is time for India to repeat how its economy counts, starting from the bases.
One of the most used methods to calculate GDP is the production approach, which the GDP estimates by adding the added value in each production stage in three sectors: primary (agriculture and allied activities), and Terbrary and Terbrary contributions, adjusted by the net effect of taxes and subsidies in products. In India, the Central Statistics Office (CSO) used the production approach nationwide.
The assignment of GDP in all sectors follows two main methodologies, the upward approach and the ascending approach.
The secondary and tertiary sectors use the upward approach, where the GDP calculated by the CSO at the national level is affected by the states and broke down even more at the district level using aviable indicators or consumption tortlas. However, the indicators used are often inappropriate, since it assumes that economic activity is proportionally similar in all regions based on these indicators, instead of measuring real production at the local level.
The upward approach is when the data is collected at the district level through surveys and data of companies, farms, industries and service providers at the district level. These data are added at the state level and are consolidated subsequently nationwide. This method is used in agriculture and allied activities within the primary sector.
Board the gap
To solve this problem, we need to reverse the upward approach for an ascending approach, where the data must be collected from the district level, to the states and possible at the national level. From this point of view, the Government of Uttar Pradesh recently tested an ascending methodology in four districts: Kanpur, Gorakhpur, Varanasi and Merutut. This meant conducting two detailed surveys: the workforce survey (LFS) and the companies of the uncompassed sector (SUSE). The LFS was used to estimate employment and unemployment rates, while SUSE captured GVA by workers and companies in the manufacturing and service sectors.
The findings were surprising. Only in the manufacturing sector not incorporated, the GVA distributed for the four districts, based on the existing top method, was estimated at ₹ 8.8 Lakh Crore, while the data of the survey at the district level revealed a real GVA of ₹ 17.6 Lakh Crore (Table 1), almost double the previous estimate. It was discovered that Merutut, for example, had a manufacturing GVA or ₹ 4.82 Lakh million rupees, compared to the attached estimate or ₹ 1.94 Lakh Crore, a internship difference or 147.6 percent (Graph 2). Similar shootings were observed in Varanasi (120.2 percent higher than previous estimates) and Kanpur (78.8 percent) (Graph 2). Evidence is definitely conclusive that GDP estimation, even nationally and state, is underestimating.
It is important to keep in mind that this was only a pilot study carried out on a period of a month of one month. Seasonal variations, which can significantly affect economic activity in these sectors, separated from agriculture and construction, were not counted. However, only this limited exercise presented mass gaps between real and estimated figures, which underlines the need for a more robust and data driven methodology.
These are not just statistical anomalies. Such severe underestimations have serious implications. When the economic activity at the district level is into account, it distorts our understanding of regional development and the mistakes of the allocation of public resources. Worse, hides the economic potential of areas that could otherwise deserve more attention and investment.
If India realizes its aspiration to become an economy of $ 5 billion, and more ambitiously, an economy of $ 1 billion to Uttar Pradesh, the data at the district level must be treated as a strategic asset, as the Prime Minister Narendra or Economic has been observed, “the district was observed.” A national limit effort to implement this upward approach in all districts is requested.
It will require investment in statistical capacity, trained enumerators, digital data collection tools and a robust monitoring framework. But returns in the form of more precise economic data, better governance and inclusive development will be worth the effort.
Santhosh is a research assistant, and Seth is an associated member, at the Pahle India Foundation; Kumar is former Director General, Ministry of Statistics and Program Implementation and Distinguished Member of the Pahle India Foundation
Posted on May 2, 2025
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