What is GDP? Who measures GDP in India and how? What is its importance?
Answers
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Gross domestic product (GDP) refers to the market value of all officially recognized final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living;
GDP per capita is not a measure of personal income. See Standard of living and GDP.
It is not to be confused with Gross National Product (GNP) which allocates production based on ownership. Gross domestic product is related to national accounts, a subject in macroeconomics.
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Explanation:
Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.
Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well.
importance
Gross domestic product (GDP) is the single standard indicator used across the globe to indicate the health of an economy. Policy makers, investors, economists, businesses, bankers, politicians, and even the media keep a close watch on GDP estimates. GDP provides one single number that represents the monetary value of all the finished goods and services produced within a country's borders in a specific period. GDP may be easy to define but it is complex to calculate, and countries across the globe have different methods to arrive at their country's GDP. This article discusses how India calculates its GDP.
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