1. District Domestic Product of Karnataka*

1. DISTRICT DOMESTIC PRODUCT OF KARNATAKA* 1. Introduction: The need to have relevant data for plan formulation at the district level has been increasingly felt with the shift of emphasis to decentralised planning. For planned development of a region, it is necessary to have a prior knowledge of the level of economic development of that region. In this context, the District income estimates assume much importance as an indicator of development. The taluk income estimates also bring to light the inter taluk variations in the economic development and help the planners to set priority in formulating development plans for each taluk, depending upon its level of backwardness. In order to meet these requirements, attempts were made by the Directorate of Economics and Statistics as early as in the sixties to compute the district income estimates for the year 1960-61 with available data at that point of time. Subsequently in the seventies and the eighties, these estimates were prepared for selected years. From 1990-91 and onwards, the estimates are being regularly prepared every year at current and constant (1980-81) prices as per provisional data base. Thus, the district income estimates with 1980-81 as base are available for 1980-81, 1985-86 and 1990-91 to 1996-97. The estimates for 1997-98 is prepared with 1993-94 as base at current and constant (1993-94) prices. The estimates at current prices reflects growth in output of goods and services including the effect of change in prices, while the estimates at constant prices reveal the actual growth in the output removing the effect of change in prices. In 1999-2000 series the District Income estimates were prepared for the years 1999-2000 to 2006-07. The same has been submitted to Central Statistical Office, Government of India. At present in the new 2004-05 series, district income estimates were prepared for the years from 2004-05 and 2008-09. 2. Initiatives taken in preparation of Taluk Income estimates: For preparation of Taluk Income Estimates two consultants were provided for each district under KSSSP project. During 2010-11, training programmes were conducted at State and District levels. During the training programme, the importance of Taluk Domestic Product has been explained. The importances of various indicators were explained for TDP estimates. The various indicators were collected by the consultants for the preparation of TDP. The same estimates were scrutinized by the officers of DES and final estimates were approved during May 2012. During this year preliminary estimates were prepared for the year 2009-10 by the District consultants. The reconciliation of these estimates are completed and the data is under scrutiny Sri. U.R. Subramanya is presently working as Joint Director, SIP Division of Directorate of Economics and Statistics, GoK, Bangalore. 193 3. Concept and definition: The District income is defined as the sum total of the economic value of all goods and services produced within the district, irrespective of the fact whether the income is owned by persons inside the taluk or outside. The estimates of District Domestic Product (DDP) also termed as District Income is compiled in a similar manner to the one being followed in the case of State Domestic Product (SDP). „Income originating‟ concept is used in working out DDP; although the estimates worked out on the basis of „Income accruing‟ concept is relatively better one. Income accruing concept is followed in the preparation of National Income estimates at all India level. 4. Measures relating to Income: Gross District Domestic Product (GDDP) represents the sum of economic value of all goods and services produced within the geographical boundary of the district after deducting the necessary inputs consumed in the process of production and Financial Intermediation Services Indirectly Measured (FISIM). From this Gross District Domestic Product, Consumption of Fixed Capital (CFC) is deducted to arrive at the Net District Domestic Product (NDDP) which is normally termed as District Income. The District income is divided by the mid year estimated population of the district to get the per capita income of that District. 5. Financial Intermediation Services Indirectly Measured (FISIM): The Banking Enterprises render services to their customers in the form of maintaining their accounts and providing them Banking services. In return for these services, customers are charged nominal amount which is substantially smaller considering the expenses of the banking enterprises, on the other hand, the banks provide loans and advances and returns on such transactions are much higher when compared to the payments made to depositors. This net return accruing to banks is large enough to meet their expenses and to earn a profit. If financial enterprises are treated like any other productive enterprise, their income in the production account would only be limited to the charges made on customers which would mean that the banks would have a negative operating surplus and most likely negative value added. To circumvent this difficulty, an imputed income equivalent to interest and dividend receipts of banking and financial enterprises net of interest paid to depositors is defined as FISIM (income earned for services rendered) and is entered as a receipt item in the output of the financial enterprises. The output of the financial enterprises thus includes interest received which was paid by the producing industries. As the interest paid by the industries is already accounted for in the Gross Value Added (GVA) of the respective industries, its inclusion in the GVA of Banking industry amounts to duplication. To avoid this duplication, FISIM is allocated to the user industries as an intermediate input. 194 6. Consumption of Fixed Capital (CFC): Consumption of Fixed Capital, (CFC), also termed as „Depreciation‟ is defined as that part of the gross product which is required to replace the fixed capital used up in the process of production during the period of account. This flow is based on the concept of the expected economic life of the individual assets and is designed to cover the expected loss in value terms due to obsolescence and the normal amount of accidental damage which is not made good by repair as well as normal wear and tear. It is estimated from the value of fixed capital assets and the information on the ages of various types of assets. It is not possible to estimate the CFC unless the estimates of Gross Capital Formation (GCF) and Gross Capital Stock (GCS) are prepared. At present, the estimates of CFC for all sectors of the economy are supplied by CSO after preparing the same at the national level and allocated to the States. State level CFC is further allocated to the districts in proportion to the sectoral GVA. 7. Division of Economy into Sectors: For the purposes of estimation of district income, the economy is divided into the following sectors as in the case of state income estimates. Primary Sector: 1. Agriculture (including Livestock) 2. Forestry and Logging 3. Fishing 4. Mining and Quarrying. Secondary Sector: 5. Manufacturing a) Registered b) Un-registered. 6. Construction 7. Electricity, Gas and Water Supply Tertiary Sector: 8. Transport, Storage and Communication a) Railways b) Transport by other means c) Storage d) Communication 9. Trade, Hotels and Restaurants 10. Banking and Insurance 195 11. Real Estate, Ownership of Dwellings and Business Services, including legal services. 12. Public Administration 13. Other Services. Gross Domestic Product (GDP) is worked out first for all the above sectors individually and CFC is deducted to get Net Domestic Product (NDP) for that particular sector. However, in the case of Public Administration, NDP is worked out first and then CFC is added to get GDP. 8. Method of Estimation: The income estimates from the above mentioned sectors are worked out in any one or more of the following three methods. i) Production Approach: This approach involves evaluation of all the goods and services produced within the district during a period of time from which inputs and depreciation are deducted, to get the estimates of income. ii) Income Approach: The aggregate income in this method is viewed to have been distributed among the four factors of production viz., Land, Labour, Capital and Enterprises in the form of rent, wages, interest and profits. iii) Expenditure Approach: This approach is based on measurement of income at the stage of disposal. All that is produced is either ultimately consumed or a part of it is saved for future consumption or future production of goods and services. The money value of consumption expenditure plus the savings gives the Income. 9. Methodology for preparation of Taluk Income Estimates: The methodology for preparation of Taluk income estimates very much depends on availability of basic data at taluk level. There has been a feeling that the data base at the taluk level is far from satisfaction for estimation of income at the taluk level. Nevertheless, the data in respect of commodity producing sectors viz., Primary Sector and Manufacturing (Registered) Sector, is fairly sound, but appears to be very scanty in respect of remaining sectors. Therefore the taluk level data could be utilised to the extent of its availability to compute the taluk income estimates adopting the state level methodology. In the case of non commodity producing sectors, where the taluk wise basic data are not available, the State level estimates are allocated to the districts on the basis of suitable district wise indicators and in turn to the taluks with suitable indicator. Further, in some of the commodity producing sectors, though the taluk wise production data are available, the corresponding prices may not be available. In such cases, Taluk wise production and State average prices will have to be utilised for preparation of taluk income estimates.

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