While appraising the country’s slide in the growth rate from a robust 8.7 per cent average during 2009-10 and 2010-11 to 6.7 per cent in 2011-12 and 4.5 per cent in 2012-13, analysts conventionally look at macro data for the country, which shows that the slide was caused by a rotting industry, which grew by only 1 per cent during the year, a steep downfall from 7.6 per cent increase in 2010-11 and 7.8 per cent in 2011-12. The growth rates in agriculture, forestry and fishing also dropped from 8.6 per cent and 5 per cent to 1.4 per cent over this period.
However, what is missed out in this countrywide analysis is that India is a federal setup in terms of 28 states and seven union territories (number of states has gone up to 29 following split of Andhra Pradesh into Telengana and Andhra Pradesh). The states are endowed with diverse physical and social infrastructures as well as political and economic capabilities.
Also, while granting that the central government does influence the economies of states, particularly their resources through central transfers as also through legislations and policies over forest, environment and mineral resources, the state economies and state political setups do play a part in determining the economic performance of the country. Thus, leaving out seven union territories that are under central government rule, the size of states varies from a giant Maharashtra which has state gross domestic product (SGDP) of Rs. 8.44 trillion to a relatively tiny Mizoram that has SGDP of only Rs. 0.054 trillion.
The states also vary in living standards: from a prosperous Goa that has got per capita constant price income of Rs. 145,923 to a pauper Bihar which has per capita income that is a tenth of the same in Goa.
As a result, studying all-India economic feat by states/union territories would be an important dimension to the growth dynamics of the country. A further refinement in this direction to get a still more comprehensive view on growth drivers for the Indian economy would involve analysing state performance by major sectors and analysing sectors (at all-India) in turn by states.
In order to study the country’s performance by this dimension i.e. by states we have drawn upon the state domestic product (SGDP) data as given by the Central Statistics Office on the website of the Ministry of Statistics and Programme Implementation, and juxtaposed the same with all-India data. These data are compiled by Directorate of Economics and Statistics of respective state governments, presumably using the methodology of CSO, which, however, says that estimates for the years 2004-05 to 2010-11 have been discussed by CSO with the state DES, thus apparently disclaiming the responsibility for subsequent years’ data.
Viewed thus, using SGDP data for all the states and union territories that should conceptually make up all-India, the country’s performance during 2012-13, particularly its slide during the year, was baffling. The country’s GDP should have fallen only moderately from 7 per cent all-state (or 6.7 per cent for all-India) in 2011-12 to 6.8 per cent (all-state) and not steeply to 4.5 per cent (all-India). In fact, barring Mizoram (4.11 per cent) and Tamil Nadu (4.14 per cent), forming just around a twelfth in terms of all-India GDP, all other states surpassed all-India average. In the subsequent year 2013-14, out of 22 states whose SGDP data are available, only Rajasthan was an underperformer whose economy grew 4.6 per cent against the national average of 4.9 per cent.
The clue to the conundrum was the trend in the balancing item i.e. the difference between all-state and all-India totals. Though this item is just 5-6 per cent of all-India total, the volatility in this is very sharp. Thus, the balancing item dropped 45 per cent during 2012-13 and its share in all-India aggregate fell to 2.5 per cent, which led to a much lower 4.5 per cent growth in GDP for All-India, against 6.8 per cent for all-state aggregate. The item had remained volatile earlier also: it fluctuated between 16 per cent rise in 2006-07 to 10 per cent drop in the following year. This difference with all-state total falling short of all-India total uniformly in recent years could be due to methodological and coverage issues like supra-regional sectors.
The CSO methodology for all-India aggregates is regarded as more robust, so apparently the state-wise performance is likely to be overstated in one or more states. Nevertheless, even as CSO could be justified in accepting inevitability of this balancing item, we suggest that there should be some orderliness in the growth of the item in tandem with all-India data for the country.