MoSPI’s state GDP draft: what a household-spending view could reveal

On 9 October 2026, the Ministry of Statistics and Programme Implementation released draft guidelines for estimating state economies from the expenditure side, using the 2022–23 base-year framework. The proposal would give states a common method for estimating how households consume, governments provide services and businesses invest. Feedback is open until 28 October. MoSPI’s announcement.

According to the ministry, no state or Union Territory currently compiles private final consumption expenditure, the national-accounts measure covering household consumption and consumption by non-profit institutions serving households. Some already estimate government consumption and fixed investment. The draft seeks to fill out that spending picture, although missing trade data means a complete expenditure account remains some way off.

What the familiar state GDP number measures

Gross state domestic product, or GSDP, measures economic production within a state. The current approach mainly starts with the value added by its farms, factories and service providers. Value added is the value of what a producer makes after deducting the goods and services it uses up in making it. Adding value at each stage avoids counting the same output repeatedly as it moves through a supply chain.

Consider a bakery buying flour and selling bread. Counting both the flour purchase and the full value of the bread as the bakery’s contribution would count the flour twice. Its value added instead captures what baking contributes beyond the purchased inputs. State accounts combine such contributions across industries, then adjust for taxes less subsidies on products to arrive at GSDP. The draft describes this production approach as the main basis of current state estimates. Draft guideline, section 1.

An expenditure approach follows the final use of output. It asks how much goes into consumption, investment and net trade. These are two ways of viewing the same economy: one follows where value is created, while the other follows what ultimately happens to the goods and services.

The distinction becomes particularly useful at state borders. Suppose a refrigerator is made in Tamil Nadu and bought by a household living in Karnataka. Its manufacturing value added belongs where it was produced. The household’s purchase belongs in the consumption picture of its home state. Trade between the states connects the two. Household spending alone cannot show how much Karnataka produced, because residents can buy output made elsewhere.

Spending means more than household shopping

The draft’s expenditure framework has several parts. Private final consumption expenditure, or PFCE, covers households and non-profit institutions serving them. Government final consumption expenditure covers services such as public administration, education and healthcare. Capital formation covers fixed assets, changes in inventories and valuables. Exports minus imports complete the connection to domestic production.

“Final” consumption separates things used to satisfy needs from things used up in producing something else. A household’s bread purchase is final consumption; a bakery’s flour purchase is an input to production. Business equipment belongs under investment rather than household consumption. The framework therefore sorts spending by its purpose instead of adding every payment together.

It also reaches beyond transactions visible in a bank account. PFCE includes the estimated value of goods households produce for their own consumption and housing services enjoyed by people who own and occupy their homes. A new dwelling itself is a fixed asset; the housing service it provides is consumption. These distinctions help account for economic activity even when nobody pays a monthly rent or buys the home-grown food from a shop.

How the household estimate would be built

The draft does not propose a fresh count of every purchase by every household. It combines surveys and administrative records, and in many cases uses those sources to allocate an all-India estimate among states. A household consumption survey provides a sample-based view of spending; administrative records can cover activities that need a different measure.

For much of the state allocation, the proposed method uses per-person consumption expenditure from the Household Consumption Expenditure Survey, or HCES, together with population projections. Multiplying the two gives an estimated consumption total for each state. The states’ relative shares can then be used to distribute the corresponding national PFCE estimate, mostly at the level of published expenditure groups. Draft guideline, section 3.2.4.

This is an allocation method, so the resulting number depends on how well the indicator represents the item being estimated. Where survey items do not map directly to a PFCE item, the draft allows the use of a related survey item’s proportions.

Other sources fill particular gaps. The proposal uses state-level domestic electricity consumption and survey-derived prices for electricity, Vahan sale-price data for motor cars and motorcycles, and airport passenger numbers to allocate spending on air transport. Banking and insurance require RBI and insurance-regulator data because the relevant services are not available from HCES for this allocation.

New survey results and, when available, updated census population data would also change the information used for allocation.

The trade gap prevents a complete account

Imports need to be deducted in an expenditure account because some household consumption, government consumption and investment buys goods or services produced elsewhere. Exports need to be added because a state can produce goods or services purchased by people outside it. In the refrigerator example, leaving out interstate trade would break the connection between Karnataka’s consumption and its own production.

The draft identifies some usable goods-flow records, including interstate movement data and e-way bills. But it says state-level international goods-import data are unavailable. State-level services trade is also missing, both internationally and between states.

As a result, section 3.4 explicitly defers compilation of state imports and exports of goods and services until the relevant data become available. Better estimates of consumption and investment can add useful information, while the full trade-adjusted expenditure total remains unfinished. Draft guideline, section 3.4, printed page 36.

What better spending estimates could reveal

Production figures tell us which industries create value in a state. Consumption and investment estimates would add a view of how output is used: the scale and composition of residents’ consumption, government services and asset creation. A common method would also make comparisons easier to interpret, because states would follow more consistent rules for assigning spending.

The quality of those comparisons will depend on the underlying data. Some investment estimates in the draft use national ratios with state production figures when direct state information is lacking. The expenditure view would therefore combine new information with estimates that still rely partly on the production data; it would not be an entirely independent measurement of the economy.

For now, the October release supplies proposed methods rather than new state growth rates or consumption rankings. The next steps are the feedback process, decisions on the methods and the work of assembling estimates. Alongside those developments, the unresolved trade data deserve attention: they determine whether a fuller account of spending can ultimately be reconciled with production within each state.