Mod 9: State Domestic Product (GSDP, NSDP) & Regional Disparities

📖 Chapter 2 🧩 Module 11 of 16 ⏱️ ~5 min read 💡 20 MCQs

Topic Part 1 of 2

Concept

9.1 GSDP, NSDP and per capita state income

🏫 School level · NCERT Class 9–12 (the base for UPSC, BPSC, SSC and Bank exams)

Size, per capita and growth answer different questions

Gross State Domestic Product (GSDP) is the value of all final goods and services produced within the geographical boundary of a state in a year: the state-level counterpart of GDP. NSDP = GSDP − depreciation. Per capita NSDP (per capita state income) = NSDP ÷ state population. State estimates are prepared by each state’s Directorate of Economics and Statistics (DES) using methods coordinated with the NSO.

Fig 9.1 A big state can lead in total output while a small one leads per person (illustrative bars).

Table 9.1 Three different questions about states
Question	Typical answer	Why
Largest economy (GSDP)?	Maharashtra	Mumbai’s finance, industry and services
Highest per capita income?	Small states such as Goa (and Sikkim in recent data)	High output relative to a small population
Lowest per capita income?	Bihar	Large population, low urbanisation and industrialisation, agriculture dependence
Fastest GSDP growth (a given year)?	Can be a poorer state, e.g. Bihar in 2010-11	A small base grows fast in percentage terms

Worked example

A state has NSDP of ₹8 lakh crore and a population of 13 crore. Find per capita NSDP. If its GSDP grows 10% while a richer state grows 6%, does the gap in rupees necessarily shrink?

Per capita NSDP = 8,00,000 crore ÷ 13 crore ≈ ₹61,500.
Not necessarily: 10% of a small base can be fewer rupees than 6% of a large base, so the absolute gap can still widen.

≈ ₹61,500; the absolute gap need not shrink

⭐ Key Points for Exams

GSDP: output within the state; NSDP = GSDP − depreciation.
Per capita NSDP = NSDP ÷ population; compiled by state DES.
Largest GSDP: Maharashtra; lowest per capita: Bihar; high per capita: Goa, Sikkim.

📌 Quick-Fire One-Liners

Largest state economy? Answer: Maharashtra
Highest GSDP growth in 2010-11? Answer: Bihar

Topic

Questions

MCQs

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The state with the largest GSDP need not be the state with the highest GSDP growth because:

Explanation: Percent growth and absolute size answer different questions. Maharashtra and Bihar are the pair used to teach that.

Maharashtra can lead in total GSDP while another state leads in per capita income because:

Explanation: Per capita state income divides state product by population. A smaller, richer state can outrank a larger economy.

[School] Gross State Domestic Product (GSDP) is the value of final goods and services produced:

GSDP is a domestic concept: it counts production inside the state, whoever earns it. It is the state counterpart of GDP.

[School] Per capita NSDP of a state is obtained by:

Per capita state income = NSDP ÷ population. NSDP itself is GSDP minus depreciation.

[SSC pattern] State domestic product estimates are prepared mainly by:

Each state’s DES compiles GSDP/NSDP using methods coordinated with the NSO, so that state figures are comparable and add up broadly to the national total.

[Numerical] A state’s NSDP is ₹8 lakh crore and its population 13 crore. Per capita NSDP is about:

8 lakh crore ÷ 13 crore = (8 ÷ 13) lakh ≈ 0.615 lakh ≈ ₹61,500.

[School] NSDP is equal to:

The gross-to-net bridge works the same way at state level: subtract consumption of fixed capital. Dividing by population gives a per capita figure instead.

Question 1 of 7

One-liners

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Largest state economy?

Maharashtra

Highest GSDP growth in 2010-11?

Bihar

Question 1 of 2

Topic Part 1 of 2

Concept

9.2 Why per capita income differs across states

🏫 School level · NCERT Class 9–12 (the base for UPSC, BPSC, SSC and Bank exams)

Population, industry and infrastructure explain the gap

Per capita income differs widely across Indian states. The gaps come from differences in industrialisation, infrastructure, urbanisation, human capital and population growth. Densely populated states in the Gangetic plain (Bihar, Uttar Pradesh) have low per capita incomes because a large population shares a mostly agricultural output.

⚠️ Causes of low per capita income in states like Bihar and UP

Fast-growing population (the denominator grows).
Lack of entrepreneurship and industrial investment.
Inadequate infrastructure: power, roads, credit.
Heavy dependence on low-productivity agriculture; small holdings; floods (north Bihar).
Not a cause: modernisation of agriculture, which raises income.

🇮🇳 How policy responds

The Finance Commission shares central taxes partly by “income distance” (how far a state’s per capita income is below the highest), so poorer states get a larger share; the 15th Finance Commission gave this criterion the largest weight, 45%. Special schemes such as the Aspirational Districts Programme (2018) target the most backward districts.

⭐ Key Points for Exams

Causes of low per capita income: population, low industry, poor infrastructure, agriculture dependence.
15th Finance Commission: income distance 45% weight.
Faster growth narrows ratios; absolute gaps may still widen.

📌 Quick-Fire One-Liners

Is modernisation of agriculture a cause of low income? Answer: No
Criterion measuring gap from the richest state? Answer: Income distance

Topic

Questions

MCQs

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Question 93: Consider the following statements about the reasons behind the low level of Per Capita Income in Uttar Pradesh:
1. Fast growing population
2. Lack of entrepreneurship
3. Inadequate infrastructural facilities
4. Modernization of agriculture
Which statement group is correct? [U.P.P.C.S. (Mains) 2005]

Explanation: Statements 1, 2, and 3 are valid structural causes. Modernization of agriculture (Statement 4) increases income and is not a cause of poverty.

[UPSC level] In the 15th Finance Commission’s formula for sharing central taxes among states, the criterion with the largest weight was:

Income distance measures how far a state’s per capita income is from that of the highest-income state; giving it 45% weight transfers more to poorer states such as Bihar. Other criteria: population 15%, area 15%, forest and ecology 10%, demographic performance 12.5%, tax effort 2.5%.

[RBI Grade B level] A poorer state grows at 10% and a richer state at 6%. Which statement is correct?

Faster growth means relative convergence. But 10% of a small base can be fewer rupees than 6% of a large base, so absolute disparity can rise for some time.

[BPSC pattern] Which of the following is NOT a reason for the low per capita income of Bihar?

Modernising agriculture raises productivity and income, so it cannot be a cause of low income. The others reduce output per person.

Question 1 of 4

One-liners

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Is modernisation of agriculture a cause of low income?

Criterion measuring gap from the richest state?

Income distance

Question 1 of 2

Topic Part 1 of 2

Concept

🎯 Competitive Level (UPSC Pre · BPSC Pre · State PSC · SSC · Bank PO · RBI Grade B): State income in past papers

Exam map
Exam	What it asks from this module
UPSC Prelims	ranking of states by per capita NSDP (2001)
BPSC / State PSC	lowest per capita income state (63rd BPSC 2017); largest state economy (UP RO 2023); Bihar’s GSDP growth
SSC / Railways	GSDP meaning, highest per capita state
Bank PO / RBI Grade B	income distance in Finance Commission devolution, regional disparity

🏆 Previous Year Question · 63rd BPSC (Pre) 2017

63rd BPSC (Pre) 2017

The latest Per Capita Income at current prices is lowest for the Indian State of: (a) Bihar (b) Uttar Pradesh (c) Odisha (d) Nagaland (e) None of the above / More than one of the above

Per capita NSDP divides state income by population; Bihar has the largest population pressure relative to output.
Bihar has stayed at the bottom among major states even in years when its GSDP grew fastest.

(a) Bihar

⭐ Key Points for Exams

63rd BPSC 2017 and UPPSC 1993/2008: Bihar lowest per capita income.
Ranking questions are keyed to the data of their year.

📌 Quick-Fire One-Liners

Highest per capita income among states in 2009-10 (UPPSC key)? Answer: Goa

Topic

Questions

MCQs

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Question 77: Which state has the largest economy in India? [U.P. R.O./A.R.O. (Pre) (Re-Exam) 2023]

Explanation: Maharashtra consistently ranks first in Net State Domestic Product (NSDP) and GSDP across India. Maharashtra has the largest GSDP because of Mumbai’s finance, industry and services; Tamil Nadu, Uttar Pradesh, Karnataka and Gujarat follow in recent years.

Question 85: Which of the following States has the highest growth in Gross State Domestic Product in 2010-11? [U.P. Lower Sub. (Pre) 2009]

Explanation: In 2010-11, Bihar recorded the highest annual growth rate in Gross State Domestic Product among Indian states.

Question 78: Arrange the following States in descending order of Per Capita Income for the year 1998-99: A. Maharashtra | B. Gujarat | C. Uttar Pradesh | D. Punjab [U.P.P.C.S. (Pre) 2001]

Explanation: In 1998-99, the order of per capita income among these states was Punjab, Maharashtra, Gujarat, and Uttar Pradesh (DABC).

Question 79: Consider the following States: 1. Gujarat | 2. Karnataka | 3. Maharashtra | 4. Tamil Nadu
The descending order with reference to Per Capita Net State Domestic Product is: [I.A.S. (Pre) 2001]

Explanation: At the time of examination, the ranking was Maharashtra, Gujarat, Tamil Nadu, and Karnataka (3, 1, 4, 2). Rankings by per capita NSDP change over time; answer the order valid when the paper was set.

Question 80: The latest Per Capita Income at current prices is lowest for the Indian State of: [63rd B.P.S.C. (Pre) 2017]

Explanation: Bihar has the lowest per capita income among all states in India. Bihar has had the lowest per capita NSDP among major states in recent official data because of a large population, low urbanisation and a small industrial base.

Question 81: Which State has minimum Per Capita Annual Income? [U.P.P.C.S (Pre) 1993, 2008]

Explanation: Bihar persistently ranks at the bottom in per capita income. The same structural reasons (population pressure, dependence on agriculture, low industrialisation) keep Bihar at the bottom.

Question 82: Which of the following States has the highest Per Capita Income (at present)? [U.P.P.C.S. (Pre) 1994]

Explanation: Goa has consistently recorded the highest per capita income among the given states. Goa (small population, tourism, mining and services) has long led among states in per capita income; Delhi and Chandigarh are Union Territories.

Question 83: Which State/Union Territory recorded highest Per Capita Income during 2009-2010? [U.P.P.C.S. (Mains) 2011]

Explanation: In 2009-10, the highest Per Capita Income was registered by Goa. Goa was ahead of Delhi and Chandigarh in the data used for that paper.

Question 84: Which of the following States has highest Per Capita Average Income? [R.A.S./R.T.S. (Pre) 1992]

Explanation: In recent data Karnataka has overtaken others due to its IT-driven services boom (in the historical 1992 key, Haryana was highest).

Question 1 of 9

One-liners

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Highest per capita income among states in 2009-10 (UPPSC key)?

Goa

Question 1 of 1