GROSS DOMESTIC

PRODUCT
WHAT IS GDP?
THE GDP IS DEFINED AS THE MARKET
VALUE OF ALL FINAL GOODS AND SERVICES
PRODUCED WITHIN A COUNTRY IN A GIVEN
PERIOD OF TIME.

IT IS ONE OF THE MEASURE OF THE SIZE OF

THE ECONOMY.
IT IS AN INDICATOR OF ECONOMIC HEALTH
OF ANY COUNTRY.
IT CAN MEASURE SPENDING ON ALL GOODS
AND SERVICES OR IT CAN ALSO MEASURE
ALL INCOME EARNED .
MEASUREMENT :
GDP IS MEASURED BY NATIONAL
STATISTICAL AGENCY.
SUCH AS:
INDIA- MINISTRY OF STATISTICS
AND PROGRAMME IMPLEMENTATION
RUSSIA- FEDERAL SERVICE OF
STATE STATISTICS
BRAZIL- INSTITUTO BRASILEIRO
DE GEOGRAESTATISTICAIA
UNITED STATES- BUREAU OF
ECONOMIC ANALYSIS
TYPES OF MEASUREMENT
EXPENDITURE METHOD:
 GDP= CONSUMPTION+ INVESTMENT+ GOVT.
SPENDIND+ (EXPORT-IMPORT)

INCOME METHOD :
 GDP= COMPENSATION OF EMPLOYEES +
GROSS OPERATING SURPLUS+ GROSS
MIXED INCOME+ TAX LESS SUBSIDIES ON
PRODUCTION AND IMPORTS
OR
 GDP= RENT+
INTEREST+PROFIT+STRATICAL
ADJUSTMENT+ WAGES
COMPONENTS OF GDP
PRIVATE CONSUMPTION:
HOUSEHOLD EXP. SUCH AS FOOD,
RENT,MEDICAL EXP. ETC
INVESTMENT: CAPITAL
EXPENDITURE
GOVT SPENDING
CUMULATIVE EXPORT

CONTD…….
 CONTD…….
COMPENSATION OF ENPLOYEE
GROSS OPERATING SURPLUS
MIXED INCOME
RENT
INTREST
PROFIT
STATISTICAL ADJUT(CORPORATE
INCOME
TAXES,DIVIDENDS,UNDISTRIBUTED
CORPORATE PROFIT)
WAGES
CROSS-BORDER COMPARISION
 GDP OF DIFFERENT
COUNTRIES CAN BE
COMPARED BY FOLLOWING
METHODS:
 CURRENT CURRENCY
EXCHANGE RATE
 PURCHASING POWER PARITY
RATE
 GDP PER CAPITA
CONTD…
 CURRENT EXCHANGE RATE METHOD
CONVERTS THE VALUE OF GOODS
AND SERVICES USING GLOBAL
CURRENCY EXCHANGE RATE.

 PPP- RELATIVE EFFECTIVE

DOMESTIC PURCHASING POWER OF
THE AVERAGE PRODUSER OR
CONSUMER WITHIN AN ECONOMY.
 GDP PER CAPITA IS GDP DIVIDED BY
THE AVERAGE POPULATION FOR
THE SAME YEAR.
DISADVANTAGES OF PARAMETERS
EXCHANGE RATE
FLUCTUATION IN CURRENCY
EXCHANGE RATE
PPP
DOES NOT REFLECT THE VALUE OF
ECONOMIC OUTPUT IN
INTERNATIONAL TRADE
IT REQUIRES MORE ESTIMATION
THAN GDP PER CAPITA
GDP & STANDARD OF LIVING
 GDP PER CAPITA IS USED AS AN
INDICATOR OF STANDARD OF LIVING
IN AN ECONOMY
ADVANTAGES
 IT IS MEASURED FREQUENTLY,
WIDELY & CONSISTENTLY
 INFORMATION ON GDP IS
AVAILABLE ON A QUARTERLY BASIS
DISADVANTAGES
 DEFINITION OF GDP DOES NOT
SUGGESTS.
 MAKES GDP A PROXY FOR
STANDARD OF LIVING.
 DOES NOT TAKE INTO ACCOUNT THE
BLACK MARKET.
 IGNORES VOLUNTEER, UNPAID
WORK. EXAMPLE : LINUX
 QUALITY OF LIFE IS DETERMINED BY
MANY OTHER THINGS THAN
PHYSICAL GOODS & SERVICES.
AN ANALYSIS OF INDIA’S GROSS
DOMESTIC PRODUT
1. (1980-81 TO 1990-91)
2. (1991-92)
3. (1993-94 TO 1998-99)
4. (1999-2000)
5. (2000-01 TO 2004-05)
CHANGING COMPOSITION OF GDP
FLUCTUATION IN GDP
1. Innovation: Technological
Advancement
2. Political Events
3. Weather
4. War
5. Monetary policies
6. Government policies
7. International factors
 …continued
8. Cumulative export.

9. Black markets.

10. Informal business practices.

 …continued
11. Aggregate Demand

Consumer Confidence, Interest

C=Consumption Rate, Disposable Income, Stock
Market, Expectations

Interest Rate, GDP, Industry

I=Investment Conditions, Expectations

Requirements of political
supporters and budgetary
G=Gov’t constraints influence fiscal
policy decisions on both G and
Spending T (taxes)
 PROJECTED US$ GDP PER CAPITA
GROWTH
Brazil China India Russia France Germany Italy Japan UK US
2000-05 9.8 9.2 3.7 7.0 2.2 1.4 2.7 1.1 3.0 2.6
2005-10 6.3 11.2 7.5 10.3 1.5 2.0 1.6 0.9 1.9 1.7
2010-15 6.4 9.2 7.4 8.1 1.5 1.6 1.7 1.2 1.9 1.3
2015-20 6.2 7.8 7.2 7.5 1.6 1.3 1.7 1.8 1.6 1.3
2020-25 4.6 7.3 7.4 6.1 1.6 0.9 1.2 1.8 1.2 1.4
2025-30 4.7 6.9 8.2 6.2 1.6 0.9 0.9 1.5 1.3 1.7
2030-35 5.2 6.5 8.9 5.2 1.6 1.7 0.8 1.0 1.7 1.9
2035-40 5.3 6.3 8.9 4.3 1.9 2.0 1.3 1.2 2.0 2.0
2040-45 5.0 5.9 8.3 3.6 1.9 1.9 1.8 1.6 1.8 1.9
2045-50 4.9 5.4 7.6 3.4 2.0 1.8 2.1 2.0 1.7 1.9
 ProjectedUS$GDP Per Capita Growth: 5-Year Averages
 Average
 %yoy
 BRICs VS G6
`
WRAPPING UP
IT MEASURE ECONOMIC
HEALTH
BRICs WILL OVERTAKE G6
DETERMINES THE STANDARD
OF LIVING
UNDERSTANDING THE GLOBAL
DEMAND PATTERN
IT HELPS TO BE CYNOSORE IN
THE GLOBAL ECONOMIC