how Government of India calculate the GDP of india
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Answer:
The GDP of India is Calculated in two different methods and they are leading to differing figures that are nonetheless close in range..... The factor cost figure is calculated by calculating the data for the net change in value for each sector during a particular time period
The GDP Calculation Process
The GDP in India is calculated using two different methods, leading to differing figures that are nonetheless close in range.
The first method is based on economic activity (at factor cost), and the second is based on expenditure (at market prices). Further calculations are made to arrive at nominal GDP (using current market price) and real GDP (inflation-adjusted). Among the four released numbers, the GDP at factor cost is the most commonly followed figure and reported in the media. A sample GDP report that indicates the GDP calculation for all four figures can be accessed here. (See related: Nominal vs. Real GDP, and the GDP Deflator.)
The factor cost figure is calculated by collecting data for the net change in value for each sector during a particular time period. The following eight industry sectors are considered in this cost:
Agriculture, forestry, and fishing
Mining and quarrying
Manufacturing
Electricity, gas and water supply
Construction
Trade, hotels, transport, and communication
Financing, insurance, real estate, and business services
Community, social and personal services
Here is an edited sample report from Q2 2014 showing overall GDP change of 6.9%, with a similar percentage change across different industry sectors. For example, mining and quarrying declined by 2.9%, while financing, insurance, real estate, and business services saw a rise of 10.5%.
India GDP Report
Using these numbers, it is easy to see the current state of the economy and its different subsectors. Investors can make informed business and investment decisions and the government can implement policies accordingly.
The expenditure (at market prices) method involves summing the domestic expenditure on final goods and services across various streams during a particular time period. It includes consideration of expenses towards household consumption, net investments (i.e., capital formation), government costs, and net trade (exports minus imports).
India GDP Report
The GDP numbers from the two methods may not match precisely, but they are close. The expenditure approach offers a good insight into which parts contribute most to the Indian economy. For example, domestic household consumption, which forms 59.5% of the economy, is the reason why India remains unaffected to a good extent by global slowdowns. Any economy with a high concentration on exports will be more susceptible to the effects of global recessions.