2
DEFINITIONS‘ FORGDPThere are three ways to defineGDP. Each definition is conceptuallyidentical.3
I. GDP is equal to the total expendituresfor all final goods and services producedwithin the country in a stipulated perio...
I. GDP is equal to the total expenditures for all finalgoods and services produced within the country in astipulated perio...
I. GDP is equal to the total expenditures for all finalgoods and services produced within the country in astipulated perio...
GDP = C + I + G+(X-M)GDP = C + I + G+(X-M)ORORGDP = consumption + gross investmentGDP = consumption + gross investment+ go...
 “Gross" means that depreciation of capital stockis not subtracted out of GDP. If net investment(which is gross investmen...
9
Where :C : Consumption I : InvestmentG : Government spendingX : ExportsM : Imports 10GDP = C + I + G+(X-M)GDP = C + I...
 C : consumption Includes :: Personal expenditures mainly consists of: food households medical expenses rent, etc....
 I : investments by business or households in capital. Example, If you spend money to renovate your hotel sothat occupan...
 G : Total government expenditures on final goodsand services. Includes :: Investment expenditure by the government. P...
 X : Gross Exports. Includes :: all goods and services produced for overseasconsumption. Example, If a domestic produc...
 M : gross imports. Includes :: any goods or services imported for consumption Example, If the renovation of hotel inv...
INDIAN ECONOMY-FACTS ON INDIAGDP The Indian economy is the 11th largest in the world. Ranks 5th pertaining to purchasing...
INDIA CURRENTLY HAS THE 11TH LARGESTGDP IN THE WORLD…17
…ACCOUNTING FOR 1.6% OF THEGLOBAL GDP IN 2002…18
…AND RANKS 26TH IN THE WORLD BYTOTAL TRADE IN GOODS AND SERVICES (US$BILLION, 2002)…WTO: US$ billion, 200219
INDIA HAS BEEN ONE OF THE FASTESTGROWING ECONOMIES IN THE WORLD OVERTHE LAST 20 YEARSAnnual average growth rates of 10 fas...
PROJECTING GDP USING HISTORICALGROWTH RATES, INDIA WOULD BE THE 6THLARGEST ECONOMY IN 2050WDI: Constant 1995 US$billion21
22USING HISTORICAL GROWTH RATES,INDIA WOULD BE THE 10THLARGESTTRADER IN 2050
STRENGTHS OF GDP Broadest indicator of economic output andgrowth. Takes inflation into account, allowing forcomparisons ...
LIMITATIONS OF GDPTOJUDGE THE HEALTH OF AN ECONOMY Underground economy Official GDP does not take into account the under...
ALTERNATIVES TO GDP Human Development Index (HDI) Calculations uses: GDP, Indicators of life expectancy and education le...
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GDP:an overview
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GDP:an overview

  1. 1. 2
  2. 2. DEFINITIONS‘ FORGDPThere are three ways to defineGDP. Each definition is conceptuallyidentical.3
  3. 3. I. GDP is equal to the total expendituresfor all final goods and services producedwithin the country in a stipulated periodof time (usually a 365-day year).II. GDP is equal to the sum of the value added atevery stage of production (the intermediatestages) by all the industries within a country,plus taxes less subsidies on products, in theperiod.III. GDP is equal to the sum of the incomegenerated by production in the country in theperiod—that is, compensation of employees,taxes on production and imports less subsidies,and gross operating surplus (or profits)DEFINITIONS‘ FORGDP4
  4. 4. I. GDP is equal to the total expenditures for all finalgoods and services produced within the country in astipulated period of time (usually a 365-day year).II. GDP is equal to the sum of the value addedat every stage of production (theintermediate stages) by all the industrieswithin a country, plus taxes less subsidieson products, in the period.III. GDP is equal to the sum of the income generated byproduction in the country in the period—that is,compensation of employees, taxes on production andimports less subsidies, and gross operating surplus(or profits)DEFINITIONS‘ FORGDP5
  5. 5. I. GDP is equal to the total expenditures for all finalgoods and services produced within the country in astipulated period of time (usually a 365-day year).II. GDP is equal to the sum of the value added at everystage of production (the intermediate stages) by allthe industries within a country, plus taxes lesssubsidies on products, in the period.III. GDP is equal to the sum of the incomegenerated by production in the country in theperiod—that is, compensation of employees,taxes on production and imports lesssubsidies, and gross operating surplus (orprofits)DEFINITIONS‘ FORGDP6
  6. 6. GDP = C + I + G+(X-M)GDP = C + I + G+(X-M)ORORGDP = consumption + gross investmentGDP = consumption + gross investment+ government spending+ government spending+ (exports − imports)+ (exports − imports) 7
  7. 7.  “Gross" means that depreciation of capital stockis not subtracted out of GDP. If net investment(which is gross investment minus depreciation) issubstituted for gross investment in the equationabove, then the formula for NET DOMESTICPRODUCT is obtained. Consumption and investment in this equationare expenditure on final goods and services. The exports-minus-imports part of the equation(often called net exports) adjusts this bysubtracting the part of this expenditure notproduced domestically (the imports), and addingback in domestic area (the exports). 8
  8. 8. 9
  9. 9. Where :C : Consumption I : InvestmentG : Government spendingX : ExportsM : Imports 10GDP = C + I + G+(X-M)GDP = C + I + G+(X-M)
  10. 10.  C : consumption Includes :: Personal expenditures mainly consists of: food households medical expenses rent, etc. For example, if a hotel is a private homethen renovation spending would bemeasured as Consumption. 11
  11. 11.  I : investments by business or households in capital. Example, If you spend money to renovate your hotel sothat occupancy rates increase, that is private investment. Includes: Construction of a new mine. Purchase of machinery or equipment for factory. Purchase of software. Expenditure on new houses. Buying goods and services. NOTE:: Investments on financial products is not includedin Investments.12
  12. 12.  G : Total government expenditures on final goodsand services. Includes :: Investment expenditure by the government. Purchase of weapons for the military Salaries of public servants. Example: if a government agency is convertingthe hotel into an office for civil servants therenovation spending would be measured as partof public sector spending (G). 13
  13. 13.  X : Gross Exports. Includes :: all goods and services produced for overseasconsumption. Example, If a domestic producer is paid to makethe chandelier for a foreign hotel, the paymentwould be counted in gross export.14
  14. 14.  M : gross imports. Includes :: any goods or services imported for consumption Example, If the renovation of hotel involves thepurchase of a chandelier from abroad, thatspending would be counted in gross imports.15
  15. 15. INDIAN ECONOMY-FACTS ON INDIAGDP The Indian economy is the 11th largest in the world. Ranks 5th pertaining to purchasing power parity (PPP) acc.to World Bank The GDP of India in the year 2007 was US $1.09 trillion. India is the one of the most rapidly growing economies in theworld. The growth rate of the India GDP was 9.4% per year. Per capita income in India is $964 at nominal and $4,182 atPPP16
  16. 16. INDIA CURRENTLY HAS THE 11TH LARGESTGDP IN THE WORLD…17
  17. 17. …ACCOUNTING FOR 1.6% OF THEGLOBAL GDP IN 2002…18
  18. 18. …AND RANKS 26TH IN THE WORLD BYTOTAL TRADE IN GOODS AND SERVICES (US$BILLION, 2002)…WTO: US$ billion, 200219
  19. 19. INDIA HAS BEEN ONE OF THE FASTESTGROWING ECONOMIES IN THE WORLD OVERTHE LAST 20 YEARSAnnual average growth rates of 10 fastest growing economies over1980-2002 excl. small countries (pop < 10 million)Source:WDI20
  20. 20. PROJECTING GDP USING HISTORICALGROWTH RATES, INDIA WOULD BE THE 6THLARGEST ECONOMY IN 2050WDI: Constant 1995 US$billion21
  21. 21. 22USING HISTORICAL GROWTH RATES,INDIA WOULD BE THE 10THLARGESTTRADER IN 2050
  22. 22. STRENGTHS OF GDP Broadest indicator of economic output andgrowth. Takes inflation into account, allowing forcomparisons against other historical timeperiods. 23
  23. 23. LIMITATIONS OF GDPTOJUDGE THE HEALTH OF AN ECONOMY Underground economy Official GDP does not take into account the underground economy, That is transactions contributing to production, such as illegal trade and tax-avoidingactivities, are unreported, causing GDP to be underestimated. Sustainability of growth GDP does not measure the sustainability of growth. Quality of goods People may buy cheap, low-durability goods over and over again, or they may buyhigh-durability goods less often. It is possible that the monetary value of the items sold in the first case is higher thanthat in the second case, in which case a higher GDP is simply the result of greaterinefficiency and waste. Non-market transactions GDP excludes activities that are not provided through the market, such as householdproduction and volunteer or unpaid services. As a result, GDP is understated. Unpaid work conducted on Free and Open SourceSoftware (such as Linux) contribute nothing to GDP, but it was estimated that itwould have cost more than a billion US dollars for a commercial company to develop.24
  24. 24. ALTERNATIVES TO GDP Human Development Index (HDI) Calculations uses: GDP, Indicators of life expectancy and education levels. Happy Planet Index It is an index of human well-being and environmental impact. Measures the environmental efficiency with which human well-being is achievedwithin a given country or group. Wealth Estimates Private Product Remaining European Quality of Life Survey Gross National Happiness25
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