2. Introduction
Gross Domestic product (GDP) is a monetary value of all final
goods and services produced in a period (quarterly or yearly)of
time.
An aggregate measure of production equal to the sum of the
gross values added of all resident and institutional units
engaged in production.
IMF publication states that “GDP measures the monetary value
of final goods and services –that is ,those that are brought by
final user-produced in country in given time period
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3. Objectives
GDP is used as indicator for most governments and economic
decision –makers for planning and policy formulation
Calculation of GDP provides with general health of economy
Economist analyse GDP to find whether the economy is in
recession, or in boom
GDP helps the investors to manage their portfolios by providing
them with guidance about state of economy
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4. The GDP of a country can be calculated in the below in the
mentioned rates
Expenditure approach
Income approach
Value-added approach
Simplest way to calculate GDP is
GDP=(consumption+investment+governmentspending)+(exports-
imports) and the formula is GDP=C+I+G+(X-M)where:
C=spending by consumers
I=investment
G=government spending
(X-M)=net exports, it may be also be in negative .
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5. GDP: Expenditure Approach
the expenditures approach and the income approach. The production approach is
also another possible alternative.
In this approach GDP is calculated as the sum of four categories of expenditures
on output. These are:
Gross Private Consumption Expenditures(C)
Gross Private Investment (I)
Government Purchases (G)
Net Exports (X - M)
GDP = C + I + G +NX
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6. This way to estimate GDP is to calculate the sum of the final uses of goods and
services (all uses except intermediate consumption) measured in purchasers'
prices
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7. Example
Solution
C = durable goods + non-durable goods + services = 1,274 + 2,599 + 7,500 =
11,373
I = structures + equipment & software + residential + change in inventories
I = 478 + 1,200 + 425 + 48 = 2,151
G = national defense + non-defense + state and local = 769 + 409 + 1,846= 3,024
X − M = Line 16 + Line 17 − Line 19 − Line 20 = 1,546 + 658 − 2,287 − 460 = -543
GDP = C + I + G + X − M = 11,373 + 2,151 + 3,024 − 543 = 16,005
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8. Conclusion
Nepal’s economic growth rate reached 7.5% (highest since 1993)
However, the export remains slow due to India bound exports and
continued appreciation of the effective exchange rate resulting in trade
deficit
The economic growth will remain strong but it is expected to moderate
in line with country’s potential ,averaging 5%over next two years
Although Nepalese economy has been steadily growing in recent years
,lack of governmental institutions, political instability, are sources of
growing concern
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