Release of Draft Guideline for Compilation Gross State Domestic Product (GSDP) Estimates by Expenditure Approach with Base Year 2022-23

1. At a Glance

• The National Statistics Office (NSO), MoSPI has released a draft guideline for compiling Gross State Domestic Product (GSDP) from the expenditure side, using the new base year 2022-23 [1].
• It sets one common framework for all States and UTs so their estimates are consistent, comparable and methodologically standard [1].
• It fills a long-standing gap. Some States/UTs already compile GFCF and GFCE, but no State or UT compiles PFCE [1].
• UPSC relevance: it links national income accounting (GS-III), fiscal federalism and State statistical capacity (GS-II), and the 2026 rebasing of GDP.

2. Why in the News

• 09 Oct 2026: PIB/MoSPI announced the draft guideline and put it on the MoSPI website [1].
• Stakeholders can send feedback until 28 October 2026 [1].
• It follows the release of the new GDP series with base year 2022-23 on 27 Feb 2026 [2][3].

3. Background & Evolution

• The problem: States are open economies. Goods, services and factor payments cross their borders freely, so regional income has traditionally been estimated only as domestic product produced within the State's boundaries [4].
• Earlier recommendations for expenditure-side State accounts that include inter-State flows [4]:
• Committee on Regional Accounts (CRA), 1972
• National Statistical Commission (NSC), 1999

• High Level Committee on Estimation of Saving and Investment (HLCESI), 2007

• Despite these, the 2020 committee found that official agencies had done little work in this direction [4].

• Maharashtra's DES compiled PFCE for 2004-05 to 2008-09. It used State-level Consumer Expenditure Survey (CES) data to share out all-India PFCE for about 80% of items [4].
• 27 June 2018: the Committee for Sub-National Accounts was set up by Gazette Notification. Its chair was Prof. Ravindra H. Dholakia (retired, IIM Ahmedabad) [4].
• 26 July 2019: the committee's tenure was extended by one year [4].
• March 2020: its final report included a dedicated chapter on the "Components of GSDP by Expenditure Side" [4].
• 2025-26 rebasing sequence:
• ACNAS, chaired by Prof. B.N. Goldar, advised MoSPI on the new series [3].
• 21 Nov 2025: first discussion paper, on production/income-side aggregates [3].
• 16 Dec 2025: second paper, on the expenditure approach [3].
• 23 Jan 2026: third paper, on quarterly GDP and sub-national accounts [3].
• 27 Feb 2026: new series released [2][3].
• 09 Oct 2026: draft expenditure-side GSDP guideline released [1].

4. Core Static Facts

Item	Fact
Issuing body	NSO, Ministry of Statistics & Programme Implementation (MoSPI) [1]
Compilers at State level	State Directorates of Economics and Statistics (DESs) [1]
Base year	2022-23 (previous series: 2011-12) [1][2]
Why 2022-23	A recent "normal" year after COVID, with robust data across sectors [2]
Components covered	PFCE, GFCE, GFCF, Changes in Inventories, Valuables, Net Exports [1]
Current gap	Some States compile GFCF/GFCE; none compile PFCE [1]
Estimation principle	Use State-specific data where possible; otherwise share out national totals using allocation indicators [1]
Status	Draft; feedback due 28 Oct 2026 [1]
Nominal GDP in base year (2022-23)	₹261.18 lakh crore [2]
Real GDP growth, new series	7.2% in 2023-24; 7.1% in 2024-25 [2]
Expenditure identity	GDP = C + I + G + (X − M). At State level, saving = GSDP − PFCE − GFCE = investment + (State exports − State imports) [4]

Key terms

• PFCE: Private Final Consumption Expenditure
• GFCE: Government Final Consumption Expenditure
• GFCF: Gross Fixed Capital Formation
• GSVA: Gross State Value Added
• NSDP: Net State Domestic Product
• DDP: District Domestic Product [4]

5. Multi-Dimensional Analysis

Economic

• Shows demand-side drivers of each State's economy: consumption, investment and government spending. Production-side GSDP cannot show these [1][4].
• Gives a cross-check on production/income-side GSDP. The gap between the two methods (the statistical discrepancy) indicates data quality [1][4].
• Makes State-level saving and investment rates possible, which are useful for State-level growth and credit planning [4].

Administrative / Statistical capacity

• Aims to build the capacity of State DESs and harmonise how States estimate [1].
• Main bottleneck: States lack data on inter-State trade and on spending by residents outside the State (and by non-residents inside it). This rules out the commodity-flow method for State PFCE [4].
• Workaround: share out national PFCE using indicators from the NSSO Household Consumption Expenditure Survey. This suits items where national accounts and CES figures differ by 30% or less [4].

Federalism / Governance

• Comparable State accounts give a firmer basis for Finance Commission transfers, fiscal comparisons between States, and regional policy [4].
• A uniform method limits State-specific methodological choices and improves credibility. The 2020 committee had recorded large revisions in State GSDP estimates [4].
• Releasing the guideline as a draft for public comment reflects consultative standard-setting [1][3].

Technological / Data

• New data sources make the work feasible [4]:
• DGCIS publishes State-wise, commodity-wise international export data.
• GST data on inter-State flows can feed State net-export estimates.

6. Recent Developments (last 12-18 months)

• 21 Nov 2025: first discussion paper (production/income approach) [3]
• 16 Dec 2025: second discussion paper (GDP from the expenditure approach) [3]
• 23 Jan 2026: third discussion paper (quarterly GDP and sub-national accounts); comments due 5 Feb 2026 [3]
• 27 Feb 2026: new GDP series with base year 2022-23 released; replaces 2011-12 [2]
• 09 Oct 2026: draft guideline on expenditure-side GSDP released [1]
• 28 Oct 2026: deadline for stakeholder feedback [1]

7. Prelims Hooks

• The draft guideline was prepared by the NSO under MoSPI, not NITI Aayog or RBI [1].
• Base year of the guideline: 2022-23 [1].
• The previous national accounts base year was 2011-12 [2].
• New GDP series with base 2022-23 released on 27 Feb 2026 [2].
• Six expenditure components: PFCE, GFCE, GFCF, Changes in Inventories, Valuables, Net Exports [1].
• No State/UT currently compiles PFCE. Some compile GFCF and GFCE [1].
• State GSDP is compiled by State DESs, under NSO guidance [1].
• ACNAS (2025-26 rebasing) was chaired by Prof. B.N. Goldar [3].
• The Committee for Sub-National Accounts was chaired by Prof. Ravindra H. Dholakia. It was set up in June 2018 and reported in March 2020 [4].
• The Committee on Regional Accounts was set up in 1972 [4].
• The only State known to have compiled PFCE (2004-05 to 2008-09) was Maharashtra [4].
• GDP for base year 2022-23 at current prices: ₹261.18 lakh crore [2].
• The expenditure approach is complementary to the production/income approach for GSDP. It does not replace it [1].

8. Why Most State Numbers Will Be Borrowed From the National Total

• The method mostly divides the all-India figure. It does not measure each State directly
• The guideline says: use State data where possible. Where there is none, share out the national total using allocation indicators [1].
• Maharashtra's past attempt shows how far this went. Survey data covered about 80% of consumption items. For the other 20%, it simply used each State's share of GSVA (the value a State produces) [4].

• This creates a problem. Consumption is then divided by how much a State produces. A State that produces a lot but consumes little looks like a big consumer.

• This weakens the main promise: a cross-check on the production-side GSDP

• The two methods are supposed to be independent. The gap between them tells us how good the data is [4].

• If the expenditure side is built from production-side shares, both sides carry the same error. The gap shrinks, and the data looks better than it is.

• The household survey and the national accounts do not agree

• The CES (Consumer Expenditure Survey, the NSSO survey that asks households what they spend) is used to share out PFCE (private consumption spending) [4].
• The 2020 committee said this works only for items where CES and national figures differ by 30% or less. Other items need other methods [4].
• The transport sector alone explains almost 25% of the gap between NSSO and national accounts figures [4].

• The CES also leaves out NPISH (Non-Profit Institutions Serving Households: charities, trusts, religious bodies). Their spending is part of PFCE [4].

• Old investment can be counted as new investment

• Many studies shared out power-sector GFCF (spending on new machines, buildings and other fixed assets) using each State's power-sector GSDP [4].
• But today's GSDP comes from plants built years ago. It does not show where new money is going now [4].
• So a State with old plants can get credit for investment that is really happening somewhere else.

9. Trade Between States: The Biggest Unmeasured Number

• Trade between States is too big to guess
• The Economic Survey 2017-18 used GST data. It found that India's internal trade in goods and services is about 60% of GDP [5].
• Earlier estimates had put inter-State trade in goods at only 30–50% of GDP [5].

• So, for most States, the 'net exports' figure (what goes out minus what comes in) is a large part of the equation, not a small one.

• Net exports will absorb every other error

• The committee's own framework works out net domestic exports as a residual (what is left over): GSDP minus consumption, investment, government spending and foreign trade [4].
• Any mistake in PFCE or GFCF goes straight into this residual. A State's 'trade surplus' may just be a sum of errors.

• The committee said clearly: until GST data is available in a usable form, this method gives only an approximation [4].

• Some flows have no clear owner

• When a trader imports goods and sells them to buyers in other States, the flow is hard to trace [4].
• A company with factories in many States reports its total imports, but not how they are split between those States [4].
• GST data also leaves out goods and services outside GST [5]. So even full GST data will not show all trade between States.

10. Can State Statistics Offices Actually Do This?

• States cannot see all government spending inside their borders
• GFCE (government consumption spending) in a State has three parts: State government, Central government and local bodies [4].
• Six of 33 States/UTs could not get or analyse local bodies' budget data at all. Four more had only part of it [4].
• No State DES could include what the Central government spends inside the State [4].

• So even the 'easy' component is incomplete today.

• States have started this work before and then dropped it

• A few States did compile public-sector capital formation. The 2020 committee found this was neither copied by other States nor continued by the same States [4].

• A guideline alone cannot fix this. It needs staff and steady funding in each DES.

• Even production-side GSDP is still shaky in some States

• Bihar's GSDP for 2015-16 was ₹4,86,430 crore in the advance estimate. The final figure was ₹3,69,469 crore, about 24% lower [4].
• Goa's figure went up by 20.6% in a single revision [4].
• The expenditure side is built on top of these numbers. It cannot be more reliable than its base.

11. Is a Mostly-Estimated Number Worth Publishing?

• The strongest objection
• If most of the PFCE, GFCF and net exports figures come from sharing out national totals, the result shows the method more than the State's real economy.

• Users may then rank States on 'consumption' or 'saving' that was never really measured.

• The honest answer: partly right, but starting is still better

• The CRA (1972), NSC (1999) and HLCESI (2007) all asked for these accounts. Little was done because everyone waited for perfect data [4].
• The 2020 committee chose to start now and improve the estimates as data improves [4].

• A common method at least makes the errors the same across States. Comparisons become fairer even if each number is rough.

• What the objection gets right

• Early figures should be read as rough guides, not exact measures.
• The discrepancy and the share of each figure that is 'shared out' should be published with the estimates, so readers know how much is measured.

12. Two Kinds of State Saving, Two Different Uses

• The committee accepted two ways of measuring saving at State level [4]
• Dholakia's method counts income that reaches the State's people, including money sent from other States and abroad. It suits questions about welfare and a State's balance of payments (its money flows with the rest of India and the world) [4].

• Sethia's method counts saving generated inside the State, before Central transfers and remittances. The committee said this matters most in a federal system [4].

• Why an aspirant should care

• A poorer State that receives large Central transfers may look like a good saver on the first measure but not on the second.
• The committee asked State DESs to produce both [4]. The final guideline should say which number to use for which purpose. Otherwise States may quote whichever one looks better.

13. What NSO and the States Should Fix Before Finalising

• NSO and GSTN: make inter-State GST data usable for statistics
• Without it, net exports stay a leftover figure [4].

• The Economic Survey 2017-18 has already shown that GST data can map trade between States [5].

• DGCIS: publish State-wise imports, not just exports

• The 2020 committee asked for this directly [4].

• Without import data, a State's foreign trade balance shows only one side.

• NSO: run a separate survey on transport fuel and services

• Transport explains about 25% of the survey–accounts gap, so this one survey would fix a large share of the PFCE problem [4].

• NSO: cover NPISH through suitable surveys [4]

• NAD (National Accounts Division), NSO: work out State-wise prices of government services

• Prices of government services differ across States. Without this, GFCE at constant prices (adjusted for price changes) is not comparable [4].

• State DESs: use one tested method for GFCF

• The committee recommended the Rajeshwari et al. (2015) method for all States. For electricity, it should allocate using data on projects being built now, as Sethia did [4].

• NSO: publish a quality label with each State's figures

• Show how much of each component was measured and how much was shared out. Show the gap with production-side GSDP. This answers the main criticism above.

14. Anchors for Answers

• Data: India's internal trade in goods and services is about 60% of GDP, based on GST data (earlier estimates: 30–50% for goods only) [5]
• Data: Bihar's 2015-16 GSDP fell from ₹4,86,430 crore (advance estimate) to ₹3,69,469 crore (final), about 24% lower. This shows how shaky the State-level base still is [4]
• Data: Transport explains about 25% of the gap between NSSO survey consumption and national accounts PFCE [4]
• Data: 6 of 33 States/UTs could not get local-body spending data; no State could include Central government spending in its GFCE [4]
• Report/Committee: Committee for Sub-National Accounts (Dholakia), March 2020, Chapter 5 [4]; Economic Survey 2017-18, Vol. 1, Chapter 2 (GST view of the economy) [5]; CRA 1972, NSC 1999, HLCESI 2007 [4]
• Scheme: State Sample Survey (SSS) scheme, already used by States for a GFCF survey; it could be the route for State-level consumption and NPISH surveys [4]

15. Mains Relevance

• GS-III: Indian economy, specifically planning, mobilisation of resources, growth and development, and national income accounting.
• GS-II: Federal structure and fiscal federalism; the role of statutory and other bodies (MoSPI/NSO, Finance Commission).

Possible question stems

1. "Production-side GSDP shows what a State produces, not how its economy is driven." Discuss the importance of expenditure-side GSDP estimation for India's States and the data constraints it faces.
2. Reliable sub-national statistics are a prerequisite for cooperative fiscal federalism. Examine this in the context of recent reforms in State-level national accounts.
3. What are the challenges in estimating inter-State trade and State-level consumption in India? How can GST data help?

16. Related Topics to Study Next

• New GDP series (base year 2022-23): the parent rebasing that this guideline follows.
• Rebasing of CPI and IIP (2026): part of the same MoSPI rebasing cycle.
• Household Consumption Expenditure Survey (HCES): the main allocation indicator for State PFCE.
• Finance Commission devolution criteria: these depend on GSDP and income-distance measures.
• GST and e-way bill data: potential sources for inter-State trade and net exports.
• National Statistical Commission and MoSPI restructuring: the institutional set-up of India's statistical system.
• District Domestic Product: the next level of sub-national accounts.
• GDP vs GVA, factor cost vs market prices: core concepts for national income questions.

17. NCERT Concepts to Revise

• Private Final Consumption Expenditure (Economy): PFCE is the component no State compiles today, and it is the guideline's biggest data challenge.
• Gross Fixed Capital Formation (Economy): GFCF is the investment component some States already compile; it is one of the six expenditure components.
• Government Final Consumption Expenditure (Economy): GFCE is the government spending component; some States compile it, though local-body and Central spending are missing.
• Net exports (Economy): State net exports (inter-State plus foreign trade) is the hardest component to measure and absorbs the other errors.
• Statistical discrepancy (Economy): The gap between expenditure-side and production-side GSDP is the cross-check that shows how good the data is.
• Base year (Economy): The guideline uses the new base year 2022-23, replacing 2011-12; exams often test this.

18. Common Errors / Trap Areas

• Wrong base year: the new base is 2022-23. 2011-12 is the old base. 2023-24 is not a base year.
• Wrong agency: the guideline comes from the NSO under MoSPI. It is not from NITI Aayog, RBI or the Finance Commission. States' DESs do the actual compiling.
• PFCE status: the 2026 release says no State/UT currently compiles PFCE. Maharashtra did so historically (2004-05 to 2008-09). Do not mark "no State has ever compiled PFCE" as correct.
• "Valuables" is a separate component, distinct from Changes in Inventories and GFCF.
• Status: this is a draft open for comment, not a final or notified guideline. It complements the production approach and does not replace it.
• Committee confusion: Dholakia chaired the Sub-National Accounts committee (2018-20). Goldar chaired ACNAS (2025-26 rebasing).