Gross Domestic Product (GDP)

Reviewed by Anjaneyulu | Updated on Sep 30, 2020

Introduction

Gross domestic product (GDP) is a monetary indicator of the market value of all the final goods and services produced over a given period of time. Nevertheless, GDP (nominal) per capita does not reflect variations in countries living costs and inflation rates.

Thus, the use of the GDP per capita as a basis for purchasing power parity (PPP) is potentially more useful when comparing living standards between nations. At the same time, nominal GDP is more useful when comparing national economies on the international market.

Understanding GDP

The Organisation for Economic Co-operation and Development (OECD) describes GDP as an aggregate production measure equal to the amount of the gross value added by all resident and institutional units involved in the production and services (plus taxes after reducing any subsidies on items not included in the value of their outputs).

An IMF report states that GDP measures the monetary value of final goods and services which are purchased at the end of the year.

Total GDP can be broken down into the contribution of each sector of the economy or industry. The per capita GDP is the ratio of GDP to the region's total population, and the same is called Mean Standard of Living. GDP is considered as the most potent statistical indicator of national development and progress in the world.

GDP in India

In India, contributions to GDP are mainly divided into three broad sectors, i.e. agriculture and allied services, industry and service sector. In India, GDP is measured as market prices and the base year for computation is 2011-12.

GDP at market prices = GDP at factor cost + Indirect Taxes – Subsidies

In the estimates for 2019-20, the growth in real GDP during 2019-20 is estimated at 5% as compared to 6.8% in 2018-19. India's GDP stood at 4.7% in the 3rd quarter of 2019. The quarterly GDP growth was 1% in the 2nd quarter, which raised to 1.1% in the 3rd quarter. But the quarterly GDP annual growth fell from 5% in the 2nd quarter to 4.7% in the 3rd quarter.

The annual GDP in 2018 was $ 27,18,732 million, whereas the IMF estimated GDP in 2019 was $29,35,570 million. The GDP figure was $578,691 million in the third quarter of 2019.

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