Analysis should take into account changes in district-level GDP growth

A 10% hike in new firm creation increases district-level GDP growth by 1.8%

The Survey highlighted that any analysis of new GDP methodology should also take into account changes in the district-level economic growth. It said the granular evidence shows that a 10 per cent hike in new firm creation increases district-level GDP growth by 1.8 per cent.

As the pace of new firm creation in the formal sector accelerated significantly more after 2014, the resultant impact on district- and country-level growth must be accounted for in any analysis.  Quoting a study, it said India’s improvement in indicators such as access to nutrition and electricity might explain the higher growth rate in Indian GDP post the methodological change. 

Also, granular evidence on new firm creation shows that new firm creation in the Service sector is far greater than that in manufacturing, infrastructure, or agriculture. This micro-level evidence squares up fully with the well-known macro fact on the relative importance of the services sector in the Indian economy.