Group Presentation EEIP at IIPM

1. GDP estimation and its relevance as
a measure of growth of the Indian
Economy
GROUP-3
(3,13,22,31,40)

2. Introduction
GDP is defined by OECD (Organization For
Economic and Co-operative
Development) as
"An aggregate measure of
production equal to the sum of
the gross values added of all
resident, institutional units
engaged in production (plus any
taxes, and minus any subsidies,
on products not included in the
value of their outputs)."

3. Diagrammatic Representation
Consumption
Gross Investment
Government Spending
Exports - Imports
GDP

4. IMPORTANCE ???...
• The single standard indicator used
across the globe to indicate the
health of an economy.
• Primary indicator used to check
the country's economy.
• Identifier of the present state of
economy.
• Ranking the economies of nations
by considering their GDP number.

5. Current Scenario

6. Forecast

7. GDP Calculations in India
Three ways
• Product method
• Expenditure method
• Income approach
India uses product method -> we calculate how
much has been produced (value added that is)
in each sector and aggregate it to get GDP
figure. We also get GDP based on state levels.

8. CHANGES IN CALCULATION
• Base year change – Jan 2015 where base
year was 2011.
• CPI – Base year was taken as 2012.
• CRITICAL INPUTS - of employment survey
and household consumer expenditure
survey , new labor force survey.
• REASON – To capture changing structure of
economy and include new sectors.

9. GDP EVALUATION USING GVA
• All final finished goods and services
produced domestically in volume terms
and multiply this by their market prices
to arrive at the value of output.
• Indirect taxes such as sales tax and
excise duty after deducting subsidy is
also added into the GDP in GVA
method.
IMPACT :
• Taxed paid and subsidies are
accounted, so it is more comprehensive
– corruption avoidance.

10. COMPREHENSIVENESS IN DATA
• The new GDP incorporates more
comprehensive data on corporate
activity than the old one. Earlier,
data from the Annual Survey of
Industries (ASI), which comprises
over two lakh factories.
• Activity at the enterprise-level is
taken instead compiling the
manufacturing data factory-wise.
Therefore, selling and marketing
expenses would be taken into
account.

11. IMPACT OF CHANGE:
• Global investors use growth prospect numbers to allocate
their investment allocations between countries - GDP is a key
metric here.

12. IS GDP A TRUE AND ACCURATE
MEASURE OF GROWTH?
LEAST INACCURATE
METHOD – By Bimal Jalan
When former president A P J Abdul
Kalam was in the Central Board of
Directors of the Reserve Bank of India, he
posed a question to the then governor,
Bimal Jalan, during a meeting: “What is
this GDP business? Sometimes it goes up
and sometimes it goes down?” Jalan
responded in a lighter vein: “If you hire a
maid servant and pay her salary, the GDP
will go up. But if you get married to the
maid servant and stop giving her salary,
then the GDP will go down.”
Value addition for self consumption not
counted.

13. QUALIFYING OF GDP
Output in itself does not necessarily
contribute to human well-being. What
does contribute very significantly is the
income generated in the process of
production. More GDP may also signify
more inequality.
The green gross domestic
product (green GDP or GGDP) is an
index of economic growth with the
environmental consequences of that
growth factored into a country's
conventional GDP.

14. Dragging ourselves
towards economic
obliviation – Eric Zencey
 It ignores many costs, as when it
overlooks the healthcare costs
and early deaths wrought by air
pollution or the decreased
productivity, poorer health, lost
sleep and lost life pleasure
caused by noise pollution.
 Genuine Progress Indicator (GPI)
was designed as an estimate of
net economic benefit – Adopted
in Maryland and Vermont.

15. CONCLUSION
• Sectoral imbalances are captured.
• By GVA method , the taxes and
subsidies are also captured.
• Base year revisions and
computational changes ensure the
standards are on par with IMF
standards and ease of comparison
with other country’s GDP.