India’s states and Union Territories could get a more detailed picture of their economies under draft guidelines issued by the Ministry of Statistics and Programme Implementation (MoSPI), which propose a common framework for measuring Gross State Domestic Product (GSDP) through expenditure. Released on October 9, the draft guidelines set out a methodology based on the 2022-23 base year, covering household consumption, government spending, investment and other components of economic activity. The proposals are intended to improve consistency in state-level estimates and make them more comparable across regions.
At present, states primarily estimate GSDP through the production approach, which measures the value added by different industries. While some states already compile estimates of government consumption and fixed capital formation, none currently prepares state-level estimates of Private Final Consumption Expenditure (PFCE), according to the ministry. The proposed framework seeks to fill this gap by drawing on household surveys, government records and data from financial and sectoral regulators.
Household Surveys to Anchor Consumption Estimates
The Household Consumption Expenditure Survey (HCES) would play a central role in estimating household spending across states. Under the proposed methodology, state-wise per capita expenditure derived from the survey would be combined with population projections to help allocate national consumption estimates among states. Where household survey data are insufficient to produce reliable estimates for particular categories, the ministry has recommended using administrative records and other relevant indicators. The approach is designed to capture differences in consumption patterns across states rather than relying solely on broad national-level estimates.
Administrative Data to Fill Sectoral Gaps
The draft identifies specific data sources to estimate spending on goods and services for which comprehensive state-level information is not readily available. Electricity consumption estimates would draw on domestic electricity sales data from the Central Electricity Authority. Information from the petroleum sector would help determine expenditure on liquefied petroleum gas (LPG) and kerosene.
Vehicle purchases would be estimated using sale-price information available through the Vahan portal. The number of registered vehicles, along with an assumed average vehicle lifespan of 15 years, would be used to estimate spending on maintenance, fuel and road transport services. For banking-related expenditure, the methodology proposes using Reserve Bank of India data on deposits and personal loans. Insurance estimates would draw on premium information from the Insurance Regulatory and Development Authority of India (IRDAI).
Air passenger traffic and telecom subscription data would also serve as indicators for estimating expenditure on air travel and communication services across states. Together, these sources are intended to strengthen the coverage of household consumption estimates, particularly in areas where direct survey information is limited.
Revised Method for Private Investment
The proposed framework also addresses the challenge of measuring private corporate investment at the state level, especially in industries where direct capital expenditure data are unavailable.
MoSPI has recommended using national capital-output ratios in conjunction with state-level Gross Value Added (GVA) to estimate capital stock and investment. This would provide an alternative means of assessing investment activity where detailed state-specific information is lacking. However, the ministry has proposed deferring the compilation of state-level imports and exports of goods and services until adequate data become available.This means the expenditure-based framework would initially rely on the components for which estimation methods and supporting data can be established, while trade estimates remain subject to data availability.
A Complement to Existing GSDP Estimates
The expenditure approach offers a different perspective on state economies by examining where spending originates and how it is distributed among households, governments and businesses. In principle, it complements the production approach, which measures economic activity through the value added generated by industries. A common methodology could help states produce more consistent estimates of consumption and investment, allowing policymakers and researchers to examine the drivers of economic activity in greater detail. The guidelines remain at the draft stage, with MoSPI inviting feedback from stakeholders until October 28, 2026. Their implementation would depend on the final methodology and the capacity of state statistical agencies to compile the estimates.
