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Gross Domestic Product (GDP)

About Gross Domestic Product (GDP)

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What is Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the final monetary value of the goods and services produced within the country during a specified period of time, normally a year. In simple terms, GDP is the measure of the country's economic output in a year. In India, contributions to GDP are mainly divided into three broad sectors — agriculture, industry, and services. GDP is measured over market prices and there is a base year for the computation. The GDP growth rate measures how fast the economy is growing. It does this by comparing the country's gross domestic product in one quarter with that in the previous one, and with the same quarter of the previous year.
 
The GDP growth rate is driven by GDP’s four components. The main driver is personal consumption, which includes the critical sector of retail sales. The second component is business investment, including construction and inventory levels. The third is government spending whose largest categories are social security benefits, defence spending, and medicare benefits. The government often increases spending to jump-start the economy during a recession. The fourth is net trade.
 
When the economy is expanding, the GDP growth rate is positive. If the economy grows, so do businesses, jobs and personal income. If it contracts, then businesses hold off investing in new purchases. They delay hiring new employees until they are confident that the economy will improve. Those delays further depress the economy. Without jobs, consumers have less money to spend. If the GDP growth rate turns negative, the country's economy is said to be in a state of recession.
 
The GDP growth rate is the most important indicator of economic health. It changes during the four phases of the business cycle — peak, contraction, trough, and expansion.
 
Nominal GDP is the value of all final goods and services that an economy produces during a given year; it is not adjusted for inflation. It is calculated by using the prices that are current in the year in which the output is produced. Nominal GDP takes into account all of the changes that occurred for all goods and services produced during the year. If prices change from one period to the next and the output does not change, the nominal GDP would change even though the output remained constant.
 
Real GDP, on the other hand, is the total value of all final goods and services that the economy produces during a given year, accounting for inflation. It is calculated using the prices of a selected base year. To calculate Real GDP, you must determine how much of GDP has been changed by inflation since the base year, and divide out the inflation each year. Real GDP, therefore, accounts for the fact that if prices change but output doesn’t, nominal GDP would change.
 
In January 2015, the government moved to the new base year of 2011-12 from the earlier base year of 2004-05 for national accounts. The base year of national accounts had previously been revised in January 2010. In the new series, the Central Statistics Office (CSO) did away with GDP at factor cost and adopted the international practice of valuing industry-wise estimates in gross value added (GVA) at basic prices.
 

Latest Updates on Gross Domestic Product (GDP)

India's GDP growth rate accelerated to 8.4% in Q3FY24; FY24 growth estimate at 7.6%

Updated On: 31 May 2024 | 3:49 PM IST

Interim Budget: FM Sitharaman said that the fiscal deficit in 2023-24 is expected to be 5.8%, lower than the earlier estimates of 5.9%

Updated On: 01 Feb 2024 | 12:35 PM IST

Union budget 2024: Govt will table the interim budget where focus will likely be on controlling fiscal deficit and supporting agri ahead of the elections. Catch all the budget-related live updates

Updated On: 23 Jan 2024 | 4:58 PM IST

This happened because inflation, as viewed by GDP deflators, is expected to be quite lower than initially projected for first time, contrary to what had happened ahead of 3 previous interim Budgets

Updated On: 16 Jan 2024 | 1:53 PM IST

National Democratic Alliance governments have not compromised on capex for fiscal consolidation so far, at least in their concluding years

Updated On: 09 Jan 2024 | 11:27 AM IST

Rahul Gandhi has been criticised for "trivialising" the security breach in Parliament by belatedly raising unemployment as a political issue

Updated On: 11 Mar 2024 | 1:50 AM IST

Private sector must contribute 1.5% to such spending, he says in speech urging educational institutions to teach new technologies

Updated On: 08 Dec 2023 | 11:59 PM IST

Brokerage goes 303 bps overweight on domestic markets in MSCI Asia Pac ex-Japan portfolio

Updated On: 11 Oct 2023 | 12:52 PM IST

Neither is India the fastest-growing large economy any longer, nor the prime beneficiary of 'China Plus One', but it is surely a key emerging player with a market larger than others, notes T N Ninan

Updated On: 21 Jul 2023 | 7:22 PM IST

Business Standard brings you top news at this hour

Updated On: 29 May 2023 | 8:55 AM IST

Domestic commentators need to engage with the issue of growth rate at which India will have no "output gap" - is it really significantly lower than that achieved over two decades? - writes T N Ninan

Updated On: 19 May 2023 | 6:55 PM IST

The economies of 19 states and UTs in FY22 exceeded their pre-coronavirus levels, as they recorded double-digit growth in the last fiscal year

Updated On: 22 Aug 2022 | 10:05 AM IST

It sees downside risks emanating from a weaker than expected global growth trend, supply-side-driven commodity price shock and faster than warranted tightening of financial conditions

Updated On: 18 Jul 2022 | 11:35 PM IST

The Goldman economists now see a 30% probability of entering a recession over the next year, compared to 15% previously, and a 25% conditional probability of entering a recession in the second year

Updated On: 21 Jun 2022 | 10:32 AM IST

Today, far too many people earn far too little to support consumption growth of the kind the economy needs, notes T N Ninan

Updated On: 21 Jun 2022 | 4:23 PM IST

The IMF had cut India's gross domestic product (GDP) growth projection for 2022 to 8.2 per cent from 9 per cent in its World Economic Outlook report in April

Updated On: 01 Jun 2022 | 1:17 AM IST

Manufacturing sector contracts in March quarter due to supply disruptions

Updated On: 31 May 2022 | 11:59 PM IST

In its first monetary policy announcement of 2022-23, the RBI projected inflation to be at 5.7 per cent this financial year. Real GDP growth for the year estimated at 7.2 per cent

Updated On: 08 Apr 2022 | 11:52 AM IST

If the government thinks growth is the solution, can it be delivered in a slowing world with rising rates - within the domestic context of slower growth even before the pandemic, asks T N Ninan

Updated On: 04 Feb 2022 | 7:56 PM IST

Budget 2022 LIVE updates: Finance Minister Nirmala Sitharaman presented the annual Union Budget 2022-23 in Parliament today. Follow Business Standard for Budget highlights

Updated On: 01 Feb 2022 | 8:37 PM IST