The Gross Domestic Product is one of the main measures of economic activity that is periodically done to know the economic growth of a country. A rough definition of GDP will be that total market value of all the final goods and services produced in a particular period of time. The International Monetary Fund states that “Gross Domestic Product (GDP) is the sum of consumption expenditure (of households, Non-profit institutions serving households, and general government), gross fixed capital formation, changes in inventories, and exports of goods and services, less the value of imports of goods and services. According to the IMF definition, along with the other traditional institutions in the primary, secondary and the tertiary sector it also includes the NPISHs. The OECD defines that Non-profit institutions serving households (NPISHs) consist of NPIs which are not predominantly financed and controlled by government and which provide goods or services to households free or at prices that are not economically significant.
Although there has been various criticisms against the use of Gross Domestic Product as a measure of economic activity due to the exclusions of some economic activities it is still the most preferred measure of a country’s economic growth. In India too the measure of GDP is the only way that measures economic growth. Although in 2015, the Central Statistical Organisation of India changed the way it measures GDP by calculating the Gross Value Added (GVA) at basic prices and also changing the base year to 2011-12 still the process of measuring GDP is conducted every year.
Similarly for the states the Gross State Domestic Product (GSDP) and the Net State Domestic Product (NSDP) is calculated to measure the economic growth of a state. Nagaland as a state in India also follows the similar formulae like the rest of the country to measure GSDP and NSDP. NSDP can be defined as GSDP minus the consumption of fixed capital or in other words minus the depreciation. In the 2015-16 advance calculation of GSDP, the primary sector or the production of raw materials contributed 34% to the total Gross Value Added(GVA); the secondary sector or the manufacturing sector contributed a meagre 13% to the total GVA; while the tertiary sector or the services sector which also includes the government sector contributed 53% to the GVA. Total GVA or in the case of states the Gross State Value Added or GSVA is then added with taxes and subsidies subtracted to measure the GSDP of the state which stands at INR 2052415 lac. or 20524.15 cr. for Nagaland State in 2015-16.
In the case of Nagaland, except for the production of crops which contributes 22% to the total GSVA, the Other Services contributes 18% to the total GSVA. The Other Services excludes hotels, restaurants, repairs , transport and communication. It is then followed by public administration which contributes 12% to the total GSVA at current rate of the state. Public administration or the government sector is almost equivalent to the manufacturing or the secondary sector in Nagaland.
Although in the Other Services sector there is a measure for ‘Extra Territorial Organisations and Bodies’ in Nagaland, it is not clear what kind of institutions are included. For a small state like Nagaland the numerous non profit institutions, churches, tribe bodies and village councils, if included will surely tilt the scale. At the same time there are many fictitious or un-operational institutions and co-operatives whose estimated productions are automatically calculated in the GSDP. Interestingly, with an estimated population of 2077000 the per capita GSDP of 2015-16 at current prices therefore stands at INR 98816. The per capita income of Nagaland earlier in 2014-15 as per the CSO was INR 89607.
It is difficult to accept such a figure and the benefit of doubt also goes the existing disparity among the people. However, taking into account these figures and comparing with the existing conditions of the state many questions arise. How important does the GSDP/NSDP figures play in the annual state budget ? Is there a need to change the way GSDP/NSDP is calculated in the state if it is incorrect ? It is time for the lawmakers and leaders to start asking intelligent and smart questions if the state has to move forward.
