What is GDP? What does it mean?

What is GDP? What does it mean?

GDP was first used by Simon, an American economist, during 1934 - 44. The term was first introduced by Simon in America. This was at a time when the world's banking institutions were taking charge of estimating economic growth, most of them could not find a word for it. But when this word was displayed by exposing the word GDP in the US Congress in front of it, then the International Monetary Fund (IMF) started using this word. So today we will provide you the complete information regarding GDP or GDP through this post.

Table Of Content (TOC)

What Is Grass Domestic Product (GDP)

Grass Domestic Product (GDP) GDP is used to measure the economic system of any country. GDP in India is calculated every 3 months. 

The GDP figure depends on the growth rate of production in the major production sector of the economy.  Agriculture, industry, and services are the three major components of GDP. 

GDP rates are seen in these areas on the basis of increasing or decreasing production. GDP is presented in two ways. First, the price of production keeps on decreasing with inflation. 

This is the scale of content price under which the rate of GDP is fixed on the price of production in a base year. And the second is the current price scale, which includes the inflation of the production year.

 1- Constant price- The Statistics Department of India sets a base year for the evaluation of products and services. 

During this year, the growth rate is determined by the cost of production by basing prices and this is the constant price GDP. 

This is done to measure the GDP rate separately from inflation.

2- Current price- If the rate of inflation is added to the production value of GDP, then we get the current price of economic output. 

This means that the constant price GDP has to be linked to the then-inflation rate.

Why is GDP important to the public?

Gross domestic product is important for the public because it proves to be an important tractor for government and people to take decisions. 

If GDP increases, it means that good work is being done in the economic activities of the country and the government's policies are proving effective at the ground level and the country is moving in the right direction. 

Apart from the government, traders, stock markets, investments, and different policymakers use GDP data to make the right decisions. 

When the economy of the country performs well, the business invests more money and teaches production because the future  They are sure. 

Likewise, policymakers use GDP data to formulate policies to help the economy and are used as a cloak to make future plans.

4 main components of GDP under which estimation

The first component is Consumption Expenditure, which refers to the total expenditure of people to buy goods and services. 

The second is Government Expenditure, the third is Investment Expenditure and finally comes Net Exports. GDP is measured in nominal and real terms. 

In nominal terms, it is the value of all goods and services at current prices. Real GDP is what we usually consider the growth of the economy. GDP data is gathered from eight sectors. 

These include agriculture, manufacturing, electricity, gas supplies, mining, quarrying, forestry and fisheries, hotels, construction, trade and communication, financing, real estate and insurance, business services and community, social and public services.

GDP still doesn't cover everything

• GDP covers many sectors to assess the growth of the economy, but it still does not cover everything. Experts believe that the GDP data does not reveal the status of the unorganized sector.
• Senior economist professor Arun Kumar says, "GDP data does not include the unorganized sector which accounts for 94% of the country's employment." If GDP falls within the negative net, it means that the performance of the unorganized sector is organized. It is worse than the sector. "

GDP decline from last year

• Many agencies and experts are saying that the Indian economy may weaken by four to 15 percent in 2021-22. The Reserve Bank of India governor says that the Indian economy will go into negative territory. However, the RBI has not said how much the GDP will fall.
• The thing to keep in mind is that the Indian economy has been languishing for the past four years.
• In the year 2016-17, GDP grew by 8.3%. After this, growth was seven percent in 2017-18. It fell to 6.1% in 2018-19 and to 4.2% in 2019-20.
• A report by McKinsey states, "The covid crisis has added to the challenge. In the absence of immediate steps to increase growth, income and quality of life in India can reach a decade of stagnation. ”
• The covid epidemic has made the situation worse and economists say that it may take more time for India to recover compared to other Asian countries.

How will the fall in GDP affect the common man?

If there is a sharp decline in the country's GDP, how much effect will it have on the common man?  Falling GDP does not have any effect on the life of the common man, but it is better to say that it is only in your life that the misery of GDP puts the figure GDP a decline. 

It is also not good for the future that if the economy goes into recession then the risk of unemployment increases.

Just as the news of earning of common man starts reducing expenses and saving more, companies start behaving in the same way and Government jobs also get reduced.  Under which the process of getting people out of jobs increases rapidly. 

According to the CMEI, 50 lakh people became unemployed in the month of July, thus people reduce their expenses by being nervous.

Characteristics of GDP

• Only domestic products are included in GDP.

• GDP shows the movements of the economy

• The country's economic condition will improve through GDP.

• By comparing the GDP of one country with the GDP of another country, it can be found how the economic situation of our country is compared to other countries.

• Exports are added to GDP and imports are reduced.

GDP calculation

The value of all these is added to remember the GDP of the country. Combining all these numbers produces a number called GDP.

GDP=C+I+G+(X-M)

C= Consumer

Expenditure( consumer expenditure)

I= industries investment

G= government

Expenditure (The official)

X=export 

I=import 

When does the country's GDP grow?

An increase in the country's gross domestic product comes when imports are low and exports are high. 

In simple language, if the people of the country buy household goods, then the income of the country rises, and the GDP increases.  

That is why Made in India has been started in India to promote Indian household goods and improve the economic condition of the country.  Domestic items will get a boost in the country and only then the country's economic system will improve.

GDP growth forecast for FY 2020-21

The agency	Latest estimate %	Prior estimate %
Goldman sash	-14.8	-11.1
Fitch Ratings	-10.5	-5
Nomura	10.8	-6.1
HSBC	-7.2	—
India ratings	11.8	-5.3

Various Info Conclusion

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