GROSS

DOMESTIC

PRODUCT

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What is Gross Domestic Product? GDP is the most widely reported measure of a nation’s economic performance

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What does GDP

measure?The market value of all final goods and services produced in a nation during a period of time, usually a year

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What is an advantage of using

GDP?GDP measures value using dollars, rather than a list of the number of goods and services

Calculating GDPCommonly the Expenditure Method is used for measuring and

quantifying GDP

Formula:GDP = C + I + G+(X-M)

OR

GDP = consumption + gross investment

+ government spending

+ (exports – imports)

Diagrammatic Representation

Consumption

Gross Investment

Government Spending

(Export - Import)

GDP

Nominal GDP

Nominal GDP, is the value of all final output

produced in an economy during a given year,

calculated using the prices current in the year

which the output is produced.

Real GDP

Real GDP is the value of the final goods and

services produced calculated using the prices

of some base year.

Nominal Vs. Real

Nominal GDP is GDP calculated at existing

prices.

Real GDP is nominal GDP adjusted for

inflation.

Real GDP is important to society because it

measures what is really produced.

SIGNIFICANCE OF GDP

• Benchmark to compare a country.

• It helps us to know whether the average standard of living of the population has risen or not (GDP per capita).

• It shows growth of an economy when the results are taken over time.

LIMITATIONS OF GDP…• assumes that every monetary transaction adds

to well-being• ignores everything that happens outside the

realm of monetized exchange• treats crime, divorce and natural disasters as

economic gain• ignores the non-market economy of household

and community• treats the depletion of natural capital as income• takes no account of income distribution• ignores the drawbacks of living on foreign

assets

INDIA GDP ANNUAL GROWTH RATEThe Gross Domestic Product (GDP) in India expanded 4.40 percent in the second quarter of 2013 over the same quarter of the previous year. From 1951 until 2013, India GDP Annual Growth Rate averaged 5.8 Percent reaching an all time high of 10.2 Percent in December of 1988 and a record low of -5.2 Percent in December of 1979.

INDIA’S ECONOMY EXPANDS 4.4% IN Q2 

The economic activities which registered significant growth in Q2 were: financing, insurance, real estate and business services at 8.9 percent and community, social and personal services at 9.4 percent. The estimated growth rates in other economic activities are: 3.9 percent in trade, hotels, transport and communication; 3.7 percent in electricity, gas & water supply; 2.8 per cent in construction; 2.7 percent in agriculture, forestry & fishing.

Manufacturing and mining activities decreased 1.2 percent and 2.8 percent respectively.

According to the latest estimates available on the Index of Industrial Production, the indexes of mining, manufacturing and electricity declined 4.5 percent, 1.2 percent and 3.5 percent respectively during the second quarter. In comparison, in the first quarter, mining decreased by 1.6 percent, manufacturing by 0.8 percent and electricity grew by 6.4 percent

India's GDP Growth Pegged At 5 Percent For Current Fiscal Year; Government Data Indicates Lowest Growth Rate Since 2002

India's gross domestic product (GDP) is estimated to grow an annual rate of 5 percent in the 2012/13 fiscal year, much below the consensus estimate of 5.5 percent.

The projection by the statistics department came as a shocker as it is the lowest growth projection issued by the government and the Reserve Bank of India, since 2002.

The finance ministry had projected the economy to grow at 5.7 to 5.9 percent during the year, while the RBI had predicted 5.4 percent growth in GDP -- the worst since 2002/03 -- for the fiscal year ending March 31, 2013.

The International Monetary Fund estimated that India’s economic growth will fall at a worse-than-expected rate of 5.4 percent for the current financial year.

India’s slowdown has been faster than expected, with first quarter GDP growing just 5.3 percent. 1.: FY13 growth forecast to 5.4 percent and FY14 forecast to 6.2 percent. And if drought conditions worsen growth could drop to 4.9 percent this year.

2. Power outages are impacting growth: The recent power outage that left 50 percent of the country in darkness, and “anecdotal evidence of worsening power shortages” are all impacting growth. What’s more notified power cuts are at record highs and do not cover a massive chunk of the country that isn’t connected to the power grid.3. Consumer confidence is low and could impact consumption: Unlike the slowdown in investment which is well recorded, declining consumer confidence shows that consumption which has been stable could slow too.

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The weakness in the rupee isn’t helping exports, and exports are impacted by global demand: The share of exports in GDP has increased and while the weakness in the rupee would be expected to boost exports, the composition of India’s exports is dominated by high-value goods, so the weaker rupee is unlikely to have a major impact. Rather exports will be affected by global demand. Export growth is expected to be soft in coming months

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