Gross Domestic Product and its Growth: An Introduction Online Test 10th Social Science Lesson 10 Questions

The GDP is the market value of all the final goods and services produced in the country during a time period. The GDP measures all the goods and services produced in the country. For this, we have to add all the goods and services produced. However, a nation produces a wide range of goods like rice, shoes, trains, milk, clocks, books and bicycles. If only the quantities are taken into account, there is no meaningful way to add these up.

Only the final goods are included in the GDP. Intermediate goods are not counted in calculating the GDP because their value is included in the final goods. So, if the intermediate goods are included in the GDP it will result in what is called “double counting”.

You may argue that since the utensils are bought not as final goods but to produce tea, they are intermediate goods and so they should not be included in the GDP. However, the utensils, unlike sugar, do not form a part of the final goods, the cup of tea. For this reason, they should be included in the GDP.

‘National Income is a measure of the total value of goods and services produced by an economy over a period of time, normally a year’. Commonly National Income is called as Gross National Product (GNP) or National Dividend.

Gross National Product is the total value of (goods and services) produced and income received in a year by domestic residents of a country. It includes profits earned from capital invested abroad. GNP = C + I + G + (X–M) + NFIA)

Explanation GNP = C + I + G + (X–M) + NFIA) C = Consumption I = Investment G = Government Expenditure X-M = Export – Import NFIA = Net Factor Income from Abroad).

Net National Product (NNP) is arrived by making some adjustment with regard to depreciation that is we arrive the Net National Product (NNP) by deducting the value of depreciation from Gross National Product. (NNP = GNP − Depreciation)

Net Domestic Product (NDP) is a part of Gross Domestic Product, Net Domestic Product is obtained from the Gross Domestic Product by deducting the Quantum of tear and wear expenses (depreciation) NDP = GDP – Depreciation

Per capita Income or output per person is an indicator to show the living standard of people in a country. It is obtained by dividing the National Income by the population of a country. Per capita Income = National Income / Population

In 1867-68 for the first time Dadabhai Navroji had ascertained the Per Capital Income in his book “Poverty and Un-British Rule of India”.

Disposable income means actual income which can be spent on consumption by individuals and families, thus, it can be expressed as DPI = PI − Direct Taxes (From consumption approach DI = Consumption Expenditures + Savings)

GDP of India includes only the market value of goods and services produced in India. For example the market value of apples produced in Kashmir are included in our GDP since Kashmir is in India. The market value of apples produced in California, even if they are sold in Indian markets, are not included in our GDP because California is in the U.S.

The GDP of a country measures the market value of goods and services produced only during the specified time period. The goods and services produced in earlier periods are not included. If a year is the specified time period, the GDP of 2018 will include the market value of goods and services produced only during 2018. So, a bicycle produced in 2017 will not be included in the GDP measure for 2018.

In India the GDP is measured both annually and quarterly. The annual GDP is for a financial year which is from April1 of say 2017 to March 31, 2018. This is written as 2017-18.

The quarterly GDP estimates are for each of the four quarters into which India’s financial year is divided: First quarter, denoted Q1: April, May and June Second quarter or Q2: July, August, September Third Quarter or Q3: October, November, December Fourth Quarter, or Q4: January, February, March. The annual GDP for financial year 2017 - 18 will include only the goods and services produced during this financial year and will exclude the goods and services produced in the previous years. Likewise, GDP for Q2 will include only the goods and services produced in Q2 and will not include the goods and services produced in Q1.

Gross Domestic Product (GDP) represents the economic health of a country. It represents a sum of a country’s production which consists of all purchases of goods and services used by individuals, firms, foreigners and the governing bodies. The monetary value of all the finished goods and services produced within a country’s border in a specific time period. GDP = C + I + G + (X − M)

GDP = C + I + G + (X − M) C = Consumption I = Investment G = Government Expenditure (X − M) = X = Exports − M = Imports

The modern concept of Gross Domestic Product (GDP) was first developed by Simon Kuznets for a US Congress report in 1934.

The Income Approach method looks at GDP from the perspective of the earnings of the men and women who are involved in producing the goods and services. The income approach to measuring GDP (Y) is Y = wages + rent + interest + profit.

There are three methods of calculating GDP are: Expenditure Approach The Income Approach Value-Added Approach

The following are Importance of GDP 1. Study of Economic Growth. 2. Unequal distribution of wealth. 3. Problems of inflation and deflation. 4. Comparison with developed countries of the world. 5. Estimate the purchasing power. 6. Public Sector. 7. Guide to economic planning.

The GDP includes only the goods and services sold in the market. The services provided by parents to their children is very important but it is not included in the GDP because it is not sold in the market. Likewise, clean air, which is vital for a healthy life, has no market value and is left out of the GDP.

Limitations of GDP The GDP is the most widely used measure of the state of the economy. While appreciating its usefulness, we should be aware of some of its limitations. Several important goods and services are left out of the GDP GDP measures only quantity but not quality GDP does not tell us about the way income is distributed in the country The GDP does not tell us about the kind of life people are living

The Central Statistical Organisation (CSO), under the Ministry of Statistical department keeps the records. It processes involves conducting an annual survey of industries and compilation of various indexes like the Index of Industrial Production (IIP) Consumer Price Index (CPI) etc.

Agricultural sector is known as primary sector, in which agricultural operations are undertaken. Agriculture based allied activities, production of raw materials such as cattle farm, fishing, mining, forestry, corn, coal etc. are also undertaken.

Industrial sector is secondary sectors in which the goods and commodities are produced by transforming the raw materials. Important industries are Iron and Steel industry, cotton textile, Jute, Sugar, Cement, Paper, Petrochemical, automobile and other small scale industries.

Tertiary sector is known as service sector it includes Government, scientific research, transport communication, trade, postal and telegraph, Banking, Education, Entertainment, Healthcare and Information Technology etc. In the 20th century, economists began to suggest that, traditional tertiary services could be further distinguished from “quaternary” and “quinary” service sectors.

Services sector is the largest sector of India. Gross Value Added (GVA) at current prices for Services sector is estimated at 92.26 lakh crore in 2018-19. Services sector accounts for 54.40% of total India's GVA of 169.61 lakh crore Indian rupees. With GVA of ` 50.43 lakh crore, Industry sector contributes 29.73%.

India is 2nd larger producer of agriculture product. India accounts for 7.39 percent of total global agricultural output. Agriculture and allied sector shares 15.87%.

In Industrial sector, India world rank is 6 and in service sector, India world rank is 8. Services sector accounts for 54.40% of total India's GVA of 169.61 lakh crore Indian rupees. With GVA of ` 50.43 lakh crore, Industry sector contributes 29.73%

Contribution of Agriculture sector in Indian economy is much higher than world's average (6.4%). Contribution of Industry and Services sector is lower than world's average 30% for Industry sector and 63% for Services sector.

Gross value added (GVA) is the measure of the value of goods and services produced in an area, industry or sector of an economy. In national accounts GVA is output minus intermediate consumption; it is a balancing item of the national accounts' production account. GVA is linked as a measurement to Gross Domestic Product (GDP), as both are measures of output. The relationship is defined as GVA + taxes on products - subsidies on products = GDP GVA = GDP + subsidies - (direct, sales) taxes.

As per the economist Amartya Sen, economic growth is one aspect of economic development. Also, united nation see it like this “Economic development focuses not only on man’s materialistic need but it focuses on overall development or rise in its living standards.

Human development Index (HDI) is apt tool to measure the real development in an economy. Economic development is a qualitative measure which measures improvement in technology, labour reforms, rising living standards, broader institutional changes in an economy.

Economic Growth is Quantitative in nature. Economic Development is Qualitative in nature. Economic growth is the “Narrower” concept. Economic development is the “Broader” concept.

Economic Development results in Rise in life expectancy rate, infant, improvement in literacy rate, infant mortality rate and poverty rate etc.

The Tenure of Economic growth is Short term in Nature. It is applicable is Developed Nations. It results in increase in national income. Its occurrence is only a certain period of time.

Economic growth does not emphasize on the fair and equal distribution of wealth/income among all its people. Economic Development focuses on a balanced and equitable distribution of wealth among all individual and tries to uplift the downgrade societies.

In 1990 Mahbub ul Haq, a Pakistani Economist at the United Nations, introduced the Human Development Index (HDI). The HDI is a composite index of life expectancy at birth, adult literacy rate and standard of living measured as a logarithmic function of GDP, adjusted to purchasing power parity.

India’s HDI value for 2017 is 0.640, which put the country in the medium human development category. Between 1990 and 2017, India’s HDI value incased from 0.427 to 0.640, an increase of nearly 50 percent – and an indicator of the country’s remarkable achievement in lifting millions of people out of poverty.

India climbed one spot to 130 out of 189 countries in the latest human development rankings released today by the United Nations Development Programme (UNDP).

Between 1990 and 2017, India’s life expectancy at birth too increased by nearly 11 years, with even more significant gains in expected years of schooling. Today’s Indian school-age children can expect to stay in school for 4.7 years longer than in 1990. Whereas, India’s GNI per capita increased by a staggering 266.6 % between 1990 and 2017.

In the development path of India, it first undertook the policy of closed trade. This was to give a thrust to domestic industries and reduce dependence on foreign products and companies. Trade and interaction with the outside world remained limited. This outlook continued till 1991 when India finally decided to open its borders to free trade and liberalized its economy by allowing foreign companies to enter the Indian economy.

A thrust was given to employment generation under the Five Year plans. This was to make up for a rising population and lacking jobs to absorb the increased workforce size. Rural development was also given importance in India, for the important constituent it was of the Indian landscape. Poverty alleviation came as a corollary of rural development and a part of the development path of India. India inherited a poverty-stricken economy from the British rule, which had destroyed its resource base completely.

India has sustained rapid growth of GDP for most of the last two decades leading to rising per capita incomes and a reduction in absolute poverty. Per capita incomes have doubled in 12 years. In Per capita income, placing India just inside the Middle – Income Country category. Life expectancy at birth is 65 years and 44% of children under 5 are malnourished. The literacy rate for the population aged 15 years and above is only 63% compared to a 71% figure for lower middle – income countries.

Gross National Happiness (GNH) is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross National Happiness is instituted as the goal of the government of Bhutan in the Constitution of Bhutan, enacted on 18 July 2008.

GNH is distinguishable from Gross Domestic Product by valuing collective happiness as the goal of governance, by emphasizing harmony with nature and traditional values as expressed in the 9 domains of happiness and 4 pillars of GNH. The four pillars of GNH's are 1) sustainable and equitable socio-economic development; 2) environmental conservation; 3) preservation and promotion of culture; and 4) good governance.

A fast-growing population of working age. There are 700 million Indians under the age of 35 and the demographics look good for Indian growth in the next twenty years at least. India is experiencing demographic transition that has increased the share of the working-age population from 58 percent to 64 percent over the last two decades. India has a strong legal system and many English-language speakers. This has been a key to attracting inward investment from companies such as those specialising in Information Technology. Wage costs are low in India and India has made strides in recent years in closing some of the productivity gap between her and other countries at later stages of development.

Agricultural policy is the set of government decisions and actions relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultural product markets. Some over arching themes include risk management and adjustment, economic stability , natural resources and environmental sustainability research and development, and market access for domestic commodities. Some Agricultural policies are Price policy, land reform policy, Green Revolution, Irrigation policy, Food policy, Agricultural Labour Policy and Co-operative policy

The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. The primary objective of this model was to make the economy of India the fastest developing economy in the globe with capabilities that help it match up with the biggest economies of the world. These economic reforms had influenced the overall economic growth of the country in a significant manner.