GDP

India Inc. is poised to register a record of four consecutive years of 8+ percent of GDP growth. Newslines in pink newspapers and lot of magazines have highlighted this point now and then. However, there are too many misconceptions about Gross Domestic Product (GDP) . Here , I try to share some GDP gyan. hey...is this my blog or some educational site ?...hmmmm... watever....!!!here i start...

GDP is the ‘market value’ of all the goods, services, agricultural products generated by a region or country in a specified period. The value of goods+services+agri is derived by the final purchase prices by the end consumer. (not the wholesale prices). Goods+services+agri include farm and farm products, durables, non-durables, oil, electricity, labour prices, metals, services etc. and any item that has a market value.The GDP variation may be due to the variations in ‘market value’ of goods+services even when the quantity of products do not vary.

Nominal GDP: It is the money value of goods+services produced in a region/country based on the prices of a particular period. (inflated prices)

Real GDP: It is the money value of goods+services produced in a region/country based on the prices of a particular base period. (non inflated prices)

Note -

1. GDP accounting includes the net of imports and exports. The economic indicator which is ‘native’ to the country’s gross product which, does not include imports and exports is GNP.- Gross National Product.

2. Do not use GDPs of different countries for comparison. The prices of same goods+services are different in different countries. In which case, use the GDP calculated based on Purchase Parity Prices or based on Exchange Rates.

3. GDP sometimes is misleading and is not the ‘complete’ economic indicator as it does not include economic value addition from black-money, voluntary or charity work of economic value, goods+services exchanged in barter and not accounted in money terms. India’s GDP is quite underestimated relative to western economies, because of the amount of voluntary work is significantly higher. Your mom / wife cooking food for you does not attribute to rise in GDP in India, but similar food purchased at an restaurant contributes.
4. India’s GDP is 692 Billion $ on nominal basis and 3200+ billion $ on PPP basis.

Want a Chapter on Inflation.....its even more boring.....nope...i won;t write..