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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%

Indivjal Dhasmana 

GDP, growth, money

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 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.

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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.

First Published: Sat, February 01 2020. 01:31 IST
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