Gross Domestic Product (GDP): What Is GDP Of India And How To Calculate It?

Gross Domestic Product, or GDP, is the macroeconomic factor that determines a country's economic efficiency and capacity. GDP is associated with most of the socio-economic aspects, such as unemployment, poverty, the status of women, and the literacy rate. An increasing GDP means most of these factors are positively impacted.

Let’s find out the meaning and types of GDP along with details and highlights of the GDP of India. 

GDP of India 2024: Highlights 

As of FY2023-24, the Nominal Gross Domestic Product is estimated to attain a level of Rs.295.36 lakh crore. The Real GDP growth for 2023-2024 is stated to be 8.2% as opposed to the 2022-23 growth rate of 7.0%.

In India, GDP has three key sectors segmentation – industry, agriculture and associated services as well as services. As per recent data, the agriculture sector’s growth rate came at 1.4% for FY24 against 4.7% of the previous year, while the manufacturing sector will see a 9.9% growth and mining and electricity with 7.1% and 7.5% growth, respectively.

What Is Gross Domestic Product (GDP)? : 

GDP is the gross valuation of all the goods and services generated within a country's borders for a specific period, typically one financial year. You can identify a country's development and economic progress from its GDP. 

The percentage growth of GDP over a quarter is taken as a standard growth of the economy. As per the reports by International Monetary Fund, India is among the top 10 countries in the world based on the nominal GDP in 2023. 

What Are The Different Types Of GDP? 

There are primarily two types of GDPs. Below are the details: 

• Real GDP 

You can calculate Real GDP in accordance with a base year. For example, the base year for calculating India's Real GDP is 2011- 12. Earlier, it used to be 2004- 05. 

You can also know it by inflation-corrected GDP or current price since it is calculated by adjusting inflation. 

It is considered to be a more precise representation of GDP as it considers the actual income of individual residents after adjusting to the price fixed for a base year. 

• Nominal GDP 

Nominal GDP is assessed using prevailing market prices and does not consider inflation or deflation. From the government's perspective, Nominal GDP is a more accurate reflection of economic growth as it affects the citizens directly. 

The Cost Inflation Index is the ratio between Real and Nominal GDP. 

How To Calculate GDP? 

There are three methods to calculate GDP. They use different formulas, but the results are pretty much the same. 

• Expenditure Method 

This approach takes into consideration the total expenditure incurred by all individuals in one economy for goods and services. The formula to calculate GDP is – 

GDP = C + I + G+ NX 

Here, C denotes consumption expenditure, I denotes investment, G is for government expenditure, and NX signifies net exports. 

Suppose, for a financial year, total consumption expenditure is Rs.75,000, total investment spending on capital assets is Rs.80,000, the government spent a total of Rs.1,50,000 for economic growth, and net export was Rs.1,00,000. 

So, GDP = 75,000 + 80,000 + 1,50,000 + 1,00,000 = 4,05,000 

Hence, as per the expenditure method, GDP is Rs.4,05,000 for a financial year. 

• Output Method

You can use this approach to determine the market value of all the services and products produced within a country. This method helps eliminate any difference in GDP measurement due to price level fluctuations.

The formula for GDP calculation as per output method is – 

GDP = Real GDP (GDP at constant prices) – Taxes + Subsidies

Suppose, the real GDP of a country for a financial year is Rs.8,00,000, and it has collected taxes of Rs.3,00,000 and given subsidies of Rs.1,50,000. 

Hence, GDP = 8,00,000 - 3,00,000 + 1,50,000 = 3,50,000

So, the GDP as per the output method is Rs.3,50,000 for one financial year. 

• Income Method 

Lastly, there is the income method. As the name suggests, this approach considers the gross income earned by various factors of production, like capital and labour, within the boundaries of a country. This is a sum of expenditure made by companies on their workforce. GDP calculated based on this approach is known as GDI or Gross Domestic Income. 

The formula is- 

GDP as per Income Method/GDI = GDP at factor cost + Taxes – Subsidies 

Suppose, the total GDP at factor cost is Rs.6,00,000 for a financial year. The total amount of taxes and subsidies are Rs.1,00,000 and Rs.50,000, respectively. 

Hence, GDP as per Income Method/GDI = 6,00,000 + 1,00,000 - Rs.50,000 = 6,50,000

Hence, GDI for that financial year is Rs.6,50,000. 

What Are The Limitations Of GDP?

GDP is an important indicator of a nation’s economic growth and development, but it has its flaws. Here are some of the limitations of GDP: 

• GDP does not include non-market transactions that positively impact productivity, such as domestic, voluntary, or other participations. Also, it doesn't take into account goods produced for private consumption. 
• India is one of those countries where unequal income distribution is a prime discrepancy in its economy. GDP doesn’t reflect that. 
• You cannot determine the standard of living of a country from its GDP. India is the best example of it. It has a high GDP but a relatively low standard of living. 
• Most importantly, GDP doesn't reflect how industries affect the environment and social well-being. The government launched Green Gross Domestic Product or Green GDP to address this issue.

Various factors affect the GDP growth of India. These factors include consumer demand, investment, infrastructure, workforce and others. Every year the Economic Survey is tabled right before the Union Budget that provides data on the GDP growth of India for the upcoming fiscal year along with the economic scenario of the prevailing year.

Also Read
World GDP Ranking 2024 List