CIA 1.

Macroeconomics

Topic: Demonstrate
the understanding of macroeconomic aggregates and
measurement

Harsh

2220716

2-BBA-G

Submitted to-

Dr. Santosh Satyanarayan Baheti

 1

Table of contents-

S No. Content Page No.

1 Introduction and variable selected 3

2 Gross Domestic Product and analysis 4

Countries and their data

3 4 to 8
-Summary

4 References 9

2
 INTRODUCTION

The following project will help us to understand the relationship between macroeconomic variables and GDP.
We will be also learning about the effects of this macroeconomic variable on the GDP of the three countries
selected i.e.-

• NIGERIA ( HDI rank-163, score- 0.535)

• INDIA ( HDI rank-132, score- 0.633)

• NORWAY ( HDI rank- 2, score- 0.961)

( According to the HDI list by UNDP)

These countries have been chosen on the basis of their occurrence as under-developed, developing, and
developed countries.

Variable selected-

• LABOUR FORCE

The labour force refers to the total number of people who are eligible to work including employed and
unemployed people in a country. It consists of all the people who are able to work in a country or area or all the
people who work for a particular country. It does not include the jobless, who aren't looking for a job. To be
considered part of the labor force, you must be available, willing to work and have looked for a job recently.

The labor force represents the working population of a country. The greater it is, the more the human capital of
a nation. Further, the productivity of a nation depends on the number of products and services produced by its
labor force. So, economists and financial experts study this metric to assess the well-being of an economy.

Labour force participation rate-

The LFPR is the labor force (sum of the employed and unemployed persons) divided by the working
population (16 years and above) of a country. Its formula is expressed as follows:
[Labor force/Total civilian, non-institutional population]*100

The labour force affects the economy of a country as it has an impact on the productivity of a nation.
Productivity is measured by the number of products and services produced by the labor force in a given period.
Sectors like agriculture, mining, healthcare, textiles, etc., are highly dependent on labor. So, a higher workforce
in these sectors enhances the overall productivity of a country.
It indicates a recessionary period of an economy if the LFPR reduces compared to the previous years. This
implies that the unemployed population is growing faster than the employed population.

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Gross Domestic Product-

Gross domestic product (GDP) is the monetary value of all finished goods and services produced in a country
during a given period.

·GDP provides a general picture of a country's economy, which is used to estimate the size of an economy and
its growth rate. GDP is an important tool to guide policymakers, investors, and businesses in strategic decision-
making. Investors view GDP because it provides a framework for decision-making.

The different methods to calculate GDP include

1. The Expenditure Method
2. The Production (Output) Method
3. The Income Method

GDP Analysis-

Name 2018 2019 2020 2021

Nigeria 397.19 448.12 432.29 440.78
India 2702.93 2831.55 2667.69 3173.4
Norway 437 404.94 362.2 482.44
(in US billion dollars)

Countries-

1. Nigeria-
Nigeria has a mixed economy structured around capitalism. In a mixed economy, private businesses may
receive government intervention and some sectors may be regulated or entirely controlled by the government.
Nigeria is home to over 200 million people, making it one of the most populous countries in the world. This
allows it to have a proportionately large labour force, which allows it to maintain numerous different economic
sectors.

A more immediate problem is facing Nigeria's labour force: a phenomenon known as brain drain. Highly
skilled or highly intelligent Nigerians may seek employment outside of the country. Because Nigeria is still
developing, it can sometimes lack the means to keep particularly skilled Nigerians in Nigeria, especially when
their skills may be in demand for higher pay or more comfortable living conditions elsewhere.
Causes of brain drain include local economic recession; lack of local employment opportunities; mediocre
salaries; lack of educational systems to support career aspirations; and dissatisfaction with local politics. If
Nigerians see opportunities elsewhere, they may find a reason to leave. Brain drain reduces the Nigerian labour
force and even costs the government money.
This is the main reason behind the under-developed economic condition of Nigeria.

4
(Labour force data of Nigeria in thousands)

(GDP of Nigeria on yearly basis)

In the case of Nigeria, we can clearly see that the Nigerian economy has shown a consistent increase as their
GDP is increasing YoY. Their per capita income has also been increasing at a good rate.

There is a recession period (the year 2020) also which can be seen in the GDP graph. This was the period when
COVID-19 was at its peak and has affected every country severely.
The same kind of impact can be seen in the Labour force chart of the country.
The labour force of Nigeria has been increasing at a good rate since 2013, as it rose to around 67 million from
53 million.

By analyzing both the graphs we can conclude that the labour force of Nigeria has played an important role in
the upliftment of the Nigerian GDP because if we will bifurcate the Nigerian GDP then the major contribution
to the GDP is from the Agricultural sector and petroleum , where this increasing labour force has played a
crucial role and had performed well.

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2. India-

Economists categorize India as a newly industrialized country (NIC). These countries are not tagged as
'developed countries' but their economic growth is high over a short duration of time.
For the last 20 years, India’s GDP is growing annually by 6-7%. The Indian economy is forecasted to be a $4
trillion USD economy by 2026 according to a survey conducted by the International Monetary fund (IMF).
India is also a mixed economy. Adopting the mixed economy proved to be advantageous to India in terms of
economic freedom, citizen welfare, and resource allocation.

In India, most of the labour force is employed in the agriculture and industry sectors. The service sector
contributes to more than 50% of the GDP. The service sector is the fastest-growing sector in India. The IT
service sector in India earns almost $191 billion in revenue. India is the sixth-largest economy today (2021–22)
by nominal GDP. India ranks ahead of developed nations like France, Italy, and Canada. It is the fastest-
growing economy, and it's predicted to overcome Germany by 2030.

(Labour force data of India in millions)

(GDP of India on yearly basis)

In the case of India we can clearly see that the GDP of India has shown a consistent 6-7% increase over the
years. The per capita income of India has also responded in the same manner.

In the Indian economy also we can clearly see a recession period due to the pandemic COVID-19 during the
2019-2020 period. This same kind of impact can be seen in the case of the labour force . COVID-19 has taken
many lives and this resulted in a huge loss to the Indian labour force and human assets.

The labour force of India has been showing a constant increase from (approx) 476 million to 479 million then
to directly 489 million and then a drastic decrease to 463 million because of the pandemic and other reasons.
The GDP has also shown a drastic change after increasing year over year. It had increased from $2702.93
billion to $2831.55 billion and then sudden fall to $2667.69. But after this recession period, the Indian GDP
has shown immense growth and reached directly to $3173.4 billion.

3. Norway-

The economy of Norway is a highly developed and mixed economy. The services industry contributes 52.7%
of the GDP, followed by industry (45.1%) and agriculture (2.2%). Of the 2.8 million-person labor force,
approximately 76% work in the services sector, 21.1% in the industry sector, and 2.9% in the agriculture sector.

Although the economy of Norway is considered healthy, developed, and growing, it does face some serious
challenges. This country has a high cost of living and labor. Most of the labor force is concentrated in the
petroleum industry, which places an emphasis on unskilled labor. Because of its counts on petroleum, once
reserves are exhausted Norway will not be able to maintain its high quality of living and economic success.
Because of this reliance on nonrenewable resources and unskilled labor, economic growth is vulnerable to any
downturns in the global market.

(Labour force in million)

7
(GDP of Norway on yearly basis)

In the case of Norway we can see that the GDP of Norway is also showing a healthy increment but as it is
majorly based on the petroleum industry it has suffered a huge impact of the pandemic and due to that it has
fallen from $437 billion in 2018 to $362.2 billion in 2020.

The labour force of the country has suffered a less impact when compared to the impact on GDP as when we
see YoY data then we can easily see that the labour force of Norwy has been increasing at a good pace (except
22017-18) because the current human capital of Norway is not very much skilled, there is more number of
unskilled labours, so the scope for the improvement is more and beacuse of this reason we can see a constant
increase in the Labour force tally of Norway. As there is a constant increase in the Labour force of Norway ,
we can see that Norway has also shown a good jump in their economic performance, as from $362.2 billion in
2020 they managed to get a GDP of $482.44 billion in 2021.

Summary-

From this analysis, I have concluded that GDP (Gross Domestic Product) is the measure of goods and services
produced within a country in a given period. There are lots of macroeconomic variables that affect a country's
GDP and the prosperity of its people. Although GDP is important, it is not perfect as it does not measure non-
monetary transactions. There are a lot of things that help in making a decision regarding a country whether it is
developed, developing or under-developed.
The three countries which represented the different stages of economic growth of a country also told us about
the nature of economies in different development phases.
From this analysis we also learned how these economic variables are the key factor in the GDP , we can say
that GDP is a by-product of all the economic variables such as the Labour force, inflation, unemployment, the
balance of payments etc.
Here, now after observing and comparing all the above data and graphs we can say that both India and Norway
are having a consistent growth in GDP but when it comes to Nigeria the growth rate has been less even when
the labour force of the country has been increasing. The reason is lack of productivity or skilled labour and
unemployment. The human capital of any country should be utilized in a proper way then only the desired rate
of consistent growth will be achieved.
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References-

• Norway Labour Force: sa | Economic Indicators | CEIC (ceicdata.com)

Labour force data and participation rate of each country

• Norway GDP 1960-2023 | MacroTrends

Information about GDP and per capita income of each country

• Economy of Nigeria – Wikipedia

Information about the economy of every country