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TOPIC: GDP
SUBMITTED TO:
Dr C. Anirvinna
SUBMITTED BY:
Roopali Trivedi- 140701005
Ravi Sharma- 140701027
Rajat Gadia- 140701023
Sourabh Saxena- 140701041
INDEX
SR.NO
1
TOPIC
GDP Introduction
Ravi Sharma
Sourabh Saxena
Sourabh Saxena
Rajat Gadia
Rajat Gadia
Rajat Gadia
Roopali Trivedi
Roopali Trivedi
10
Roopali Trivedi
PG. NO
CONTRIBUTED BY
Ravi Sharma
INTRODUCTION
GDP- GDP is the market value of all the final goods and services produced within a country
within a given period of time which includes Taxes and excludes Subsidies on the products.
The equation of GDP is:
GDP = C + I + G + (X-M)
Where,
Consumption (C) - Includes personal consumption goods.
Investment (I) - Includes Gross Private Investments such as Fixed Deposits etc.
Government Purchases (G) - This category includes government spending various items.
Net Exports (X-M)- This is calculated by subtracting a nations imports (M) from exports (X).
In simple terms GDP is the national income of a country in a given period of time.
INDIAS CURRENT GDP STATSQuarter 1 (Q1): April 2014- June 2014 - 5.7.
Up from previous quarters 4.6% expansion and 4.7% growth a year earlier.
TYPES OF GDP
Actual GDP- Actual GDP is the sum of the value added by all the economic activities in an
economy.
But Actual GDP may be lower the potential GDP that is equal to the maximum sum of value of
added possible by all the economic activities by fully utilizing the capital, labor, technology and
natural resources available to the economy.
Potential GDP- Potential GDP is some kind of estimate of the maximum possible GDP by fully
utilizing the capacity / capability of all the factors/ input of production.
Source: www.tradingeconomics.com
NOMINAL GDP:
A gross domestic product (GDP) figure that has not been adjusted for inflation is known as
Nominal GDP. It can be misleading when inflation is not accounted for in the GDP figure because
the GDP will appear higher than it actually is. Nominal GDP is current year output at current year
price, even if theres no actual increase in production or value created, inflation would lead to a
continuous rise in nominal GDP.
REAL GDP:
The nominal GDP thus doesnt make much sense as an indicator of economic growth. GDP is
instead calculated on prices with respect to a given base year and these inflation adjusted prices
give a true or real account of economic growth. The base year is changed periodically to account
for structural changes in the economy, and since Jan 2010, we have been using 2004-05 prices.
But as per the new release the base year have been shifted to 20011-12.
REAL GDP= X 100
HOW IT IS CALCULATED?
There are basically three methods to calculate GDP Expenditure Method
Income Method
Production Method
Expenditure Method.
There are consumers, Firms, Government and some foreign investors in an economy who
are spending on products and services, when the expenditure made by them is added
together is GDP. Here expenditure made on final goods and services is only added.
For Example you have purchased a bread then in this case you will add the final expenditure
made on bread only you will not add all the expenses made to purchase the raw material
used to make the final product
Income Method
In this method we calculate the income of the firms, workers & income of all other
organisations in the economy and then when you add them all together to get the total GDP
of the economy.
GDP = Labour wages + Capital income + Government income + Net income from
Abroad (National of our economy working in Abroad) + Depreciation
Production Method
Here you add up the production of all newly produced goods and services in the economy,
here one thing is to be kept in mind that one should not add up the products that are
intermediate of the final goods produced. Here value added by each industry is added on
to find total GDP i.e. Value of final product value of intermediate product, double
counting is avoided
This figure is derived by breaking down the economy into different sectors and calculating the
net increment in value in each sector. The data for year 2013-14 is in the table that follows:
Source: www.tradingeconomics.com
Percentage
Change
Q3, 2012-13
Q3, 2013-14
2013-14
241556
250316
3.6
27400
26960
-1.6
3. Manufacturing
215582
211540
-1.9
25799
27090
5. Construction
106094
106726
0.6
367319
382998
4.3
261960
294751
12.5
166073
177771
TOTAL
1411784
1478152
4.7
Industry
Thus GDP for the year 2013-14 is 4.7% using the above method.
Year
2011
-12
Quarter
Q1
Q2
Q3
7.5
6.5
6.0
2012
-13
2013-14
Q4
Q1
Q2
Q3
Q4
Q1
5.1
5.4
5.2
4.7
4.8
4.4
This method simply adds up the market value of all domestic expenditures made on final goods
and services in a single year, including consumption expenditures, investment expenditures,
government expenditures, and net exports. Add all of the expenditures together and you determine
GDP. This data is useful to understand government spending as well as trends in investment
Item
981463
497120
Change in Stocks
26692
Valuables
41085
Exports
389655
Less Imports
484157
Discrepancies
-47279
1595293
WHAT ARE THE REASONS THAT GDP GROWTH RATE OF INDIA HAS DECLINED?
In India, GDP growth of India was 9.48% in 2005-2006 ,and it was suddenly decreases to 4.74%
in 2012-2013 .The reasons for that fall are below discussed-:
1. Inefficient use of money by government-:
To minimize the impact of 2008 global crisis, govt. came up popular scheme like MNREGA.
Scheme of this type have one thing in common, that is, spending is far more than the value of work
done. In short a huge amount of money was not utilized to its potential. This scheme has put a lot
of money in hands of poorest of Indians. As they spend the money, this increase demand. To meet
that demand supply need to rise .But due to poor infrastructure supply could not increase as fast
as demand, resulting in increase in inflation.
2. Inflation-:
Inflation in India is resulting in lesser domestic savings. This leads to banks having less money to
give loans. This causes the interests rates to go up. Higher interest rates means less investment,
resulting in less supply, more inflation, less GDP.
3. Scams, Environmental clearances, Gov. inaction-:
In past years India have witnessed big scams like 2G, coalmining scam, and iron ore mining scam.
All of this have created a very negative environment. Govt. is too busy in holding on to power.
This has resulted in sort of inaction by govt. Even in areas where it is necessary. There are tons of
infrastructure project proposals pending due to not getting environmental clearances. This is
causing the supply not being able to scale up demand and persistent inflation.
4. Twin Account Deficit-:
This means FD and CAD at the same time. To start with lesser export and more demand of
gold, higher crude oil prices in global market resulted in more CAD. This has resulted in two
things, weakening of Rupee and adversely impacting outlook of India as an investment destination.
Given that import > export, weakening of Rupee increased cost of import, make situation worse.
and professional services like IT also exhibited high growth. Growth in the trade, hotels, transport
and communications segment also inched up to 2.8 per cent in the first quarter from 1.6 per cent
in the same period of 2013-14.
world where inflation is increasing, people will spend more money because they know that it will
be less valuable in the future. This causes further increases in GDP in the short term, bringing
about further price increases. Thus a 10% inflation can get the economy into twice trouble as
compared to a 5% inflation rate.