All about GDP


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The decling Gross Domestic Product makes for good headlines. If you really want to understand what the GDP is all about, check this out along with some interesting tidbits.. An article by

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All about GDP

  1. 1. All about GDPThe decling Gross Domestic Product makes for good headlines. If you really want to understandwhat the GDP is all about, check this out along with some interesting tidbitsAuthor : iFast ContentA Reuters poll has suggested that annual economic growth is expected to have slowed to5% in the three months to December, having already struck a near 3-year low of 5.3%.While much is being made of the slowdown in GDP, do you really know what it is?Gross domestic product (GDP) is the measure of the output of goods and services in aneconomy. That is the simple way to put it. In reality, it measures the sum total of "value-added". The reason being to avoid the double counting that would inevitably be part of aprocess of simply adding up the value of all output. For instance, if we were to add thevalue of output of all auto component manufacturers and the value of output of allcarmakers, we would have counted car components twice. By looking only at value-added, GDP measurements prevent this double counting from happening.So it’s safe to say that GDP measures the value of final goods and services produced in acountry in a given period of time. It counts all of the output generated within theborders of a country. GDP = C + I + G + (X-M)GDP = Private consumption + Gross investment + Government spending + (exports-imports)Here are some interesting bits of news with regards to GDP which you might have notknown:  India became a trillion-dollar economy in 2007. To make global comparisons easier, an economy’s GDP is measured in the local currency and converted into dollars at the prevailing exchange rate. Economist Ajit Ranade had something interesting to say in Mumbai Mirror which is reproduced briefly here. "When India was a $1 trillion economy, the GDP growth rate was 9%. This was the growth rate achieved during 2003 to 2007. Since 2008, partly due to a global financial crisis, India’s growth has gone down steadily. Simple math tells us that an economy of size $1 trillion growing at 9% is the same as 4.5% growth for an economy twice the size. As the base grows larger and larger, in percentage, the addition of the same amount of ‘real’ growth means lower and lower growth rate. And we are growing at 5.5%, which is more than 4.5%”.
  2. 2.  Rise in electronic payments such as credit and debit cards and other mode of paperless transactions have added around $1.5 billion to India’s GDP during 2008-12 period, according to a Visa-Moodys Analytics study. Globally, increased electronic payments added $983 billion to the GDP of 56 countries during this period. India lags behind other emerging nations like China, Brazil and Russia among others in e-payments as the third largest Asian economy is still cash- driven. While China witnessed an addition of $375 billion due to the increased card usage during 2008-12, it was $51 billion for Brazil and $36 billion for Russia. According to a blogger at Wall Street Journal, the internet’s potential contribution to India’s GDP by 2015 may leap to $100 billion, from about $30 billion in 2011. This was apparently the conclusion of a study by global consulting firm McKinsey & Co. The report said that 28% of India’s population is set to have internet access by 2015, up from 10% currently. But here’s what’s most interesting, most people who access the internet in India by 2015 will do so on mobile device such as cellular phones or tablet computers. The report states that three out of four users will be mobile-only users. An increase in internet users could create 22 million jobs by 2015 from about 6 million now. The National Institute of Public Finance and Policy (NIPFP) conducted a study in the last week of December 2012 to quantify the black money being generated in India. It has been estimated that unlawful wealth exceeds 10% or more of GDP- translating into more than Rs 10 lakh crore. While in percentage terms, the figure has declined, in actual rupees it has risen when compared with its earlier studies. o 1975-76: 15-18% of GDP- Rs 9,958-1,1870 crore o 1980-81: 18-21% of GDP – Rs 20,362-23,678 crore o 1983-84: 19-21% of GDP – Rs 31,584-36,784 croreAlso Read “Budget terms you must know”Content Team, | iFAST Financial India Pvt Ltd.DISCLAIMER iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of anyof the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or bematerially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase orsale of any mutual fund. No investment decision should be taken without first viewing a mutual funds scheme informationdocument including statement of additional information. Any advice herein is made on a general basis and does not take intoaccount the specific investment objectives of the specific person or group of persons. Investors should seek for professionalinvestment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is notnecessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income fromthem may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer onthe website .Please read our disclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject tomarket risks and there is no guarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As withany investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factorsand forces affecting capital markets. Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the futureperformance of the Scheme. The name of the Scheme does not in any manner indicate the quality of the Scheme, its futureprospects or returns. Please read the Statement of Additional Information and Scheme Information Document carefully beforeinvesting.