What is Gross Domestic Product (GDP)

Gross Domestic Product (GDP)

About Gross Domestic Product (GDP)

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)

Interim Budget: FM sticks to fiscal consolidation path in Budget speech

2 min read Last Updated :Feb 01 2024 | 12:35 PM IST
Image
Budget 2024 LIVE updates: Govt raises import duty on gold, silver jewellery

2 min read Last Updated :Jan 23 2024 | 4:58 PM IST
Image
Real, nominal GDP growth, inflation play out differently this time around

6 min read Last Updated :Jan 16 2024 | 1:53 PM IST
Image
Will govt compromise on capex for fiscal consolidation ahead of polls?

7 min read Last Updated :Jan 09 2024 | 11:27 AM IST
Image
No jobs and a bleak future: Has the political class failed India's youth?

6 min read Last Updated :Mar 11 2024 | 1:50 AM IST
Image
India needs to increase R&D spending to 3% of GDP: Kris Gopalakrishnan

2 min read Last Updated :Dec 08 2023 | 11:59 PM IST
Image
China's CLSA ups India exposure on supportive macroeconomic outlook

2 min read Last Updated :Oct 11 2023 | 12:52 PM IST
Image
Missing the real achievements: Why India needs introspection, not bluster

4 min read Last Updated :Jul 21 2023 | 7:22 PM IST
Image
Top Headlines: IPEF deal on supply chains in Detroit, GDP preview and more

3 min read Last Updated :May 29 2023 | 8:55 AM IST
Image
A sustainable growth rate: At what level will India have no output gap?

4 min read Last Updated :May 19 2023 | 6:55 PM IST
Image
Kerala, UP lag as GSDP of 19 states exceed pre-Covid levels in FY22: Report

3 min read Last Updated :Aug 22 2022 | 10:05 AM IST
Image
Morgan Stanley cuts India's FY23 GDP forecast to 7.2%

3 min read Last Updated :Jul 18 2022 | 11:35 PM IST
Image
Risk of US recession now higher and more front-loaded, warns Goldman

2 min read Last Updated :Jun 21 2022 | 10:32 AM IST
Image
Companies in clover, but there's something in the economy that's amiss

4 min read Last Updated :Jun 21 2022 | 4:23 PM IST
Image
IMF may lower India's GDP growth projection for 2022 to below 8.2%

2 min read Last Updated :Jun 01 2022 | 1:17 AM IST
Image
India's GDP grows 4.1% in Q4; expands 8.7% in FY22: Govt data

4 min read Last Updated :May 31 2022 | 11:59 PM IST
Image
RBI revises inflation and growth forecasts; holds policy rates

5 min read Last Updated :Apr 08 2022 | 11:52 AM IST
Image
Optimistic scenario: Can growth take care of all the economy's problems?

4 min read Last Updated :Feb 04 2022 | 7:56 PM IST
Image
LIVE: This Budget brings more infra, more growth and more jobs, says PM

1 min read Last Updated :Feb 01 2022 | 8:37 PM IST
Image
Economic Survey 2022 Highlights: Geopolitical risks bubbling up, says PEA

2 min read Last Updated :Jan 31 2022 | 4:49 PM IST
Image
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news
news