learn GDP in digitalgkaa-most of us may not know what this GDP is. So what is GDP? How is it calculated? Let us now find out why it is so important.
Gross Domestic Product(GDP):
We often hear in the newspapers on TV that GDP has increased and decreased. Otherwise, most of us may not know what this GDP is. So what is GDP? How is it calculated? Let us now find out why it is so important.
GDP stands for Gross Domestic Product. That is, the GDP is the total value of finished products and services sold in a country over a period of one year. Suppose for example there is a supermarket. Suppose it sells a bar of soap worth 20 rupees a day, chocolate worth 10 rupees, and a book worth 50 rupees a day. Then it is one day GDP will be 80 rupees. In the same way, if the total value of goods produced and sold in the country is added, it becomes the GDP of that country.
However, not all products make up the GDP. For example, if a Japanese company sells any machine in India, it will not add to our GDP. It Will be related to Japan's GDP.
Also, secondary goods should not be counted in this GDP. Only the final items should be counted. So for example, suppose there are tires and seats used in a car. We cannot use them directly. But if you make a car with them you can use it. Here the tire, the seats are the secondary items and the car is the final item. Only the value of these final goods is calculated in GDP.
Let’s take another example. Suppose coffee is dry we can not eat it directly. But you can make coffee with it and drink it. So coffee powder becomes the secondary commodity here. Coffee comes into the final product.
And we hear that our GDP has fallen which means that most of the goods made in our country are not sold in our country. This means that we buy most goods from neighboring countries. If this happens then the companies in our country will not produce many goods as they will not buy goods made in our country. Without production, the company will have no profits. There will be no new jobs with it, or existing employees will be laid off.
Again, in order for our country's GDP to grow, we need to buy more of our country's goods. Only then will companies in our country make more and more goods. Its jobs will also increase.
This GDP is what a country's economy is like. If a country's GDP grows on a regular basis, it means that the country's economy is developing.
How is GDP calculated?
Four broad factors need to be added to calculate GDP.
The first is the "exchange cost" - the total cost of purchasing goods and services by the country's population.
The second is "government spending". The third is the "investment cost" - the cost of building a factory or infrastructure such as a bridge over the sea.
Fourth .. The last is the net worth of exports - that is, the sum of the difference between exports and imports.
GDP is calculated in two ways, nominal GDP and real GDP.
In nominal GDP .. the value of all goods and services is calculated at current prices (prices for the year in which GDP is calculated).
When inflation (price increase) is revised according to base year (year used for comparison) Real GDP - means real GDP. When we talk about growth in an economy we are talking about this real GDP.
GDP figures are compiled from eight sectors. They are:
- Agricultural sector
- Manufacturing sector
- Electricity and gas distribution
- Mining, forests, fishing
- Hotel, Construction, Commerce, Communications
- Banking, Real Estate, Insurance
- Commercial services
- Social and public services
Why is GDP important?
GDP is also one of the key factors that the government and the people take into account in making decisions.
GDP growth means that the country is doing well in terms of economic activity. That government policies are paying off at the field level. That they are moving in the right direction.
The slowdown in GDP and the recession mean that the government needs to improve its policies to help revive the economy.
Not only the government but also businessmen, stock market investors and various policy makers use GDP statistics to make decisions.
Businesses will invest more money and increase production if the economy is to prosper. That makes the future look more optimistic.
But .. if GDP figures are disappointing then everyone will take care of their money. Cost is reduced, investments are reduced. As a result, economic growth will slow further. Under these circumstances the government is expected to spend more money by announcing assistance schemes for businesses and individuals. As a result, businesses and individuals are spending more and more. It is hoped that the country's economy will come into motion.
Also .. Policymakers use GDP statistics to formulate the policies needed to help the economy. GDP figures can be used as a yardstick to determine future plans.
The full picture with GDP does not appear
Although many sectors are taken into account in GDP to calculate the growth in our country .. not all sectors are taken into account.
Experts believe that the situation in the unorganized sector is not reflected in the GDP figures
"GDP figures do not take into account the unorganized sector, which accounts for 94 per cent of India's employment," said senior economist Professor Arun Kumar.
"If the GDP is in a negative situation, it means that the unorganized sector is worse off than the organized sector," he said.
That is, if the GDP is from minus ten per cent to minus 15 per cent, it should be understood that the unorganized sector situation has declined from minus 20 per cent to minus 30 per cent.
To be clear .. GDP figures reflect how the integrated sector is functioning. But the poor people in the country completely ignore the unorganized sector which is predominant.
If the organized sector is in trouble .. it is very difficult to identify the extreme conditions in the unorganized sector.
Various financial institutions and experts predict that the Indian economy will shrink from 4 per cent to 15 per cent in the coming 2021-22 financial year.
Reserve Bank of India Governor Shaktikant Das also said that the economy was slipping into recession. However, the RBI did not say how much the GDP would shrink.
It should be kept in mind that the Indian economy has already been in a slump for the last four years.
In 2016-17, the GDP growth rate was 8.3 per cent. In 2017-18, it fell to 7 per cent. In 2018-19 it fell further to 6.1 per cent. In 2019-20, it fell to 4.2 percent.
"The Kovid crisis is doubling this challenge. Lack of urgent measures to stimulate economic growth threatens to stagnate India's income and wildlife for a decade, ”a recent report by McKinsey said.
With the corona epidemic worsening, economists say India will take longer to recover than other Asian countries.
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