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Gross Domestic Product (GDP)

About Gross Domestic Product (GDP)

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What is Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the final monetary value of the goods and services produced within the country during a specified period of time, normally a year. In simple terms, GDP is the measure of the country's economic output in a year. In India, contributions to GDP are mainly divided into three broad sectors — agriculture, industry, and services. GDP is measured over market prices and there is a base year for the computation. The GDP growth rate measures how fast the economy is growing. It does this by comparing the country's gross domestic product in one quarter with that in the previous one, and with the same quarter of the previous year.
 
The GDP growth rate is driven by GDP’s four components. The main driver is personal consumption, which includes the critical sector of retail sales. The second component is business investment, including construction and inventory levels. The third is government spending whose largest categories are social security benefits, defence spending, and medicare benefits. The government often increases spending to jump-start the economy during a recession. The fourth is net trade.
 
When the economy is expanding, the GDP growth rate is positive. If the economy grows, so do businesses, jobs and personal income. If it contracts, then businesses hold off investing in new purchases. They delay hiring new employees until they are confident that the economy will improve. Those delays further depress the economy. Without jobs, consumers have less money to spend. If the GDP growth rate turns negative, the country's economy is said to be in a state of recession.
 
The GDP growth rate is the most important indicator of economic health. It changes during the four phases of the business cycle — peak, contraction, trough, and expansion.
 
Nominal GDP is the value of all final goods and services that an economy produces during a given year; it is not adjusted for inflation. It is calculated by using the prices that are current in the year in which the output is produced. Nominal GDP takes into account all of the changes that occurred for all goods and services produced during the year. If prices change from one period to the next and the output does not change, the nominal GDP would change even though the output remained constant.
 
Real GDP, on the other hand, is the total value of all final goods and services that the economy produces during a given year, accounting for inflation. It is calculated using the prices of a selected base year. To calculate Real GDP, you must determine how much of GDP has been changed by inflation since the base year, and divide out the inflation each year. Real GDP, therefore, accounts for the fact that if prices change but output doesn’t, nominal GDP would change.
 
In January 2015, the government moved to the new base year of 2011-12 from the earlier base year of 2004-05 for national accounts. The base year of national accounts had previously been revised in January 2010. In the new series, the Central Statistics Office (CSO) did away with GDP at factor cost and adopted the international practice of valuing industry-wise estimates in gross value added (GVA) at basic prices.
 

Latest Updates on Gross Domestic Product (GDP)

The economies of 19 states and UTs in FY22 exceeded their pre-coronavirus levels, as they recorded double-digit growth in the last fiscal year

Updated On: 22 Aug 2022 | 10:05 AM IST

It sees downside risks emanating from a weaker than expected global growth trend, supply-side-driven commodity price shock and faster than warranted tightening of financial conditions

Updated On: 18 Jul 2022 | 11:35 PM IST

The Goldman economists now see a 30% probability of entering a recession over the next year, compared to 15% previously, and a 25% conditional probability of entering a recession in the second year

Updated On: 21 Jun 2022 | 10:32 AM IST

Today, far too many people earn far too little to support consumption growth of the kind the economy needs, notes T N Ninan

Updated On: 21 Jun 2022 | 4:23 PM IST

The IMF had cut India's gross domestic product (GDP) growth projection for 2022 to 8.2 per cent from 9 per cent in its World Economic Outlook report in April

Updated On: 01 Jun 2022 | 1:17 AM IST

Manufacturing sector contracts in March quarter due to supply disruptions

Updated On: 31 May 2022 | 11:59 PM IST

In its first monetary policy announcement of 2022-23, the RBI projected inflation to be at 5.7 per cent this financial year. Real GDP growth for the year estimated at 7.2 per cent

Updated On: 08 Apr 2022 | 11:52 AM IST

If the government thinks growth is the solution, can it be delivered in a slowing world with rising rates - within the domestic context of slower growth even before the pandemic, asks T N Ninan

Updated On: 04 Feb 2022 | 7:56 PM IST

Budget 2022 LIVE updates: Finance Minister Nirmala Sitharaman presented the annual Union Budget 2022-23 in Parliament today. Follow Business Standard for Budget highlights

Updated On: 01 Feb 2022 | 8:37 PM IST

Economic Survey 2022 Highlights: India's FY22 GDP growth is seen at 9.2 per cent and GDP growth for 2023 is projected at 8 per cent to 8.5 per cent, according to reports

Updated On: 31 Jan 2022 | 4:49 PM IST

Govt finances to witness consolidation in 2021-22, after uptick in deficit and debt indicators during pandemic year FY21, says Eco Survey

Updated On: 31 Jan 2022 | 2:29 PM IST

Advance estimates are released to provide the numbers to the finance ministry to work on the Budget for the next financial year

Updated On: 07 Jan 2022 | 6:02 PM IST

Gain for 7th day; shrug off worries about rising yields, oil prices

Updated On: 19 Oct 2021 | 1:09 AM IST

Repo rate and the reverse repo rate remain unchanged at 4% and 3.35%

Updated On: 08 Oct 2021 | 12:25 PM IST

Economic performance is also affected if large numbers of people are out of work, or at such low levels of income as to force under-consumption, writes T N Ninan

Updated On: 03 Sep 2021 | 10:32 PM IST

India will miss its fiscal deficit target of 6.8% of GDP by at least 1 percentage point, he said

Updated On: 16 Jul 2021 | 7:14 AM IST

India's record has been good, relative to how other countries have done and compared also to its own previous three decades, but well short of what is required and what was possible, writes T N Ninan

Updated On: 18 Jun 2021 | 10:52 PM IST

At a time when India is facing stagflation, its forex reserves have helped avert a currency crisis, but there are unintended consequences of accumulating forex. Manojit Saha explains the risks

Updated On: 18 Jun 2021 | 9:31 AM IST

The agency estimated India's economic growth at 9.3 per cent in the financial year ending March 2022 and 7.9 per cent in FY23

Updated On: 01 Jun 2021 | 11:58 AM IST

As the second wave of Covid-19 and the resultant restrictions again cripple economic activities, the State Bank of India has lowered India's growth outlook for the current financial year

Updated On: 01 Jun 2021 | 11:58 AM IST