What is GDP? Who measures GDP in India and how? What is its importance?
Answers
Answer:Let us try get some background information about GDP.
GDP or Gross Domestic Product measures the level of market economic activity in the country. It can also be an indication of the newly added material of wealth of the country’s citizens.
1. Take a very simple economy (we will add additional players step by step) where everyone is a business or working for a business (workers/employees)
People work to earn a wage/salary. Some people earn profits from investment and rent from leasing. All of them buy things in the market to consume.
On the other side, businesses employ people (Or self employed work on their own) make their products/services and sell in the market. Businesses pay salaries/wages to employees, pay interest/profits/dividends to investors, pay rent to landlords.
So, we have two sides of market economic activity - production of goods/services, consumption of goods/services. We want to know the total NEW VALUE added by the people of country during the year.
So, you add up the wages and salaries, profits/interest, rent of all the people in the country. Take data from employment survey, PF office, company accounts etc.
Or you add up the value of all goods sold by businesses to the end consumer - tax records (sales, production), company survey etc.
These two should add up to the same amount (in the simple economy we assumed).
2. Now, add businesses buying goods and services as new investment. Families of workers and Businesses save some of their money in banks, share markets or in insurance which is taken by another set of business persons to start a new business or expand existing business.
This expense by businesses on new investment is added. This again is taken from survey of businesses.
3. Add government to the mix. Government collects taxes from businesses, workers and both as consumers. Government also spends money on salaries of employees, providing services and goods to citizens etc.
Data related to this easy to get from the government’s own records.
4. Finally, we export some of what we produced and import from other countries what they produced. Our people travel abroad and consume services there, foreigners come to India and consume services here. This is calculated and added to the GDP account (to add to the value added by economic activity within the country.
Explanation:
Answer:
GPD is a monetary measure of the market value of all the final goods and services produced in a specific time period,often annually.