In keeping with the international standards, India’s economic growth story has long been measured through national level GDP estimates. Yet the most critical unit of development — the district — remains an economic blind-spot. Recognising this gap, Prime Minister Narendra Modi has emphasised the district as the fulcrum of economic progress, advocating for localised development strategies. However, without accurate District Domestic Product (DDP) estimates, policymakers, businesses, and researchers are left navigating in the dark. The existing methodology for GDP estimation relies heavily on a top-down approach, where economic output is first estimated at the national and then apportioned to States and districts based on available indicators, rather than measuring economic activity directly at the district level.
This is particularly evident in the secondary and tertiary sectors, leading to an imprecise understanding of economic activity at the grassroots level. If India is to achieve its ambition of becoming a $5 trillion economy, it must determine how much each district needs to contribute and implement policies that leverage the unique strengths of each district.
Current methodology
India’s GDP estimation broadly classifies economic activity into three sectors: (i) primary: includes agriculture, forestry, fishing, and mining; (ii) secondary: comprises manufacturing, construction, electricity, gas, and water supply, and; (iii) tertiary: encompasses services such as trade, transport, communication, banking, and real estate.
GDP in India is estimated using a mix of top-down and bottom-up approaches, depending on the sector. The estimation of the contribution of primary sector follows a bottom-up approach, where data is aggregated from the district level to State and then the national level. However, even in the primary sector, data collection methods are often outdated and inconsistent, leading to inaccuracies.
On the other hand, for the secondary and tertiary sectors, the top-down approach is followed. That is, the national GDP figures are apportioned to States and districts based on sector-specific indicators such as employment levels, wages, or infrastructure presence rather than actual economic output by Ministry of Statistics and Programme Implementation (MoSPI).
While this allows for some level of district-level disaggregation, it does not capture real-time economic activity or sectoral contributions accurately since the indicators do not capture the economic reality at the district level comprehensively. Specially, data gaps in the unorganised sector and discrepancies in survey methodologies further compromise the reliability of district-level estimates using the top-down approach.
This method, while convenient, has severe limitations. It does not offer granular insights into a district’s economic strengths and merely serves as an administrative exercise.
This results in a one-size-fits-all approach that fails to address local economic realities. We give an illustration to explain this point.
It was especially during the Covid-19 period that the lacuna in the methodology became glaringly obvious. When MoSPI, following their business-as-usual approach, distributed the GDP data proportionately to States in 2020-21, Uttar Pradesh (UP) protested due to the steep decline in the growth rate of its GDP. The argument was that the agriculture sector contributes to 25 per cent of its GSVA and 65 per cent of the population dependent on agriculture.
And this sector was least or relatively less impacted than the industrial sector and hence the decline in the growth rate of the State’s GDP should be lower than that of the States that have predominantly more GSVA from the manufacturing sector. Hence, the UP government was one of pioneer proponents of using a bottom-up approach of estimating the GDP, or calculating GDP at the district level.
The granularity of data that will come from DDP estimation will enable policymakers to tailor their interventions effectively, addressing disparities and boosting local economies. For example, a district-level GDP estimate could reveal which sectors are lagging in particular regions, whether it is agriculture in one district or manufacturing in another. With this information, targeted investments could be made in sectors that hold the potential to uplift the local economy.
It would also help understand how national or State-level policies are impacting different areas, making it possible to fine-tune those policies to ensure more inclusive growth. This approach would also strengthen fiscal federalism rather than relying on State or Central governments to determine their development trajectory, districts could develop independent economic strategies aligned with national and State goals.
Substantial investments
We also acknowledge that despite its clear advantages, transitioning to a robust district-level GDP would require substantial financial and logistical investments in statistics and data generation, along with serious commitment and collaboration between Central and State statistical agencies. The policymakers should remember that each $1 investment in statistics and data results is $32 worth in development.
In the realm of economic policymaking, the traditional approach has often been one of aggregation — looking at national or State-level data to make sweeping decisions for the entire population. While this bird’s-eye view can be useful in some contexts, it tends to miss critical regional disparities, especially in rural and underdeveloped districts. Hence, India’s vision for Viksit Bharat 2047 must be rooted in the empowerment of its districts.
In this context, DDP estimation offers a powerful tool to capture the unique economic dynamics of each region, enabling policymakers to craft targeted interventions that address local challenges and opportunities. This will ensure that economic growth is equitable, reaching the most underserved areas, and no one is left behind.
Samriddhi is a Research Associate, Payal is an Associate Fellow and Ashish, a former DG at MoSPI, is a Distinguished Fellow at Pahlé India Foundation