Gross domestic product

Definition
3 ways of definition

Total expenditure for all final goods and services produced within a country in stipulated period of time 2. Sum of value added at every stage of production by all industries within a country + taxes less subsidies on products in the period 3. Sum of the income generated by production in the country in the period!!
1.

Points to remember while calculating GDP

Diversity of the Indian Economy.
Different sectors contributing to the GDP -

agriculture, textile, manufacturing, information technology, telecommunication, petroleum, etc. The different sectors classified into three segments, such as primary or agriculture sector, secondary sector or manufacturing sector, and tertiary or service sector. With the introduction of the digital era, Indian economy has huge scopes in the future to become one of the leading economies in the world.

 India has become one of the most favored destinations

for outsourcing activities. India has become one of the most favored destinations for outsourcing activities. India at present is one of the biggest exporter of highly skilled labor to different countries The new sectors such as pharmaceuticals, nanotechnology, biotechnology, telecommunication, aviation, manufacturing, shipbuilding, and tourism would experience very high rate of growth

 India at present is one of the biggest exporter of highly

skilled labor to different countries The new sectors such as pharmaceuticals, nanotechnology, biotechnology, telecommunication, aviation, manufacturing, shipbuilding, and tourism would experience very high rate of growth

Expenditure method formula

Measuring and quantifying GDP
Formula:

GDP = C + I + G + (X-M) OR GDP = Consumption + gross investment + government spending +(exports imports). Gross" means that depreciation of capital stock is not subtracted out of GDP

NET DOMESTIC PRODUCT

. If net investment (which is gross investment minus

depreciation) is substituted for gross investment in the equation above, then the formula for NET DOMESTIC PRODUCT is obtained.

DIAGRAMMATIC REPRESENTATION
CONSUMPTION

GROSS INVESTMENT

GDP

GOVERNMENT SPENDING

(EXPORT-IMPORT)

C for consumption

C -> CONSUMPTION Includes:- Personal expenditures mainly consists of: food households medical expenses rent, etc. For example, if a hotel is a private home then renovation spending would be measured as Consumption.

I for investment
I : investments by business or households in capital.
.Includes: Construction of a new mine. Purchase of machinery or equipment for factory. Purchase of software. Expenditure on new houses. Buying goods and services. NOTE:: Investments on financial products is not included

in Investments Example, If you spend money to renovate your hotel so that occupancy rates increase, that is private investment

G for government expenditure

G : Total government expenditures on final goods and

services. Includes :: Investment expenditure by the government. Purchase of weapons for the military Salaries of public servants. Example: if a government agency is converting the hotel into an office for civil servants the renovation spending would be measured as part of public sector spending

X FOR EXPORT
X : Gross Exports.
Includes :: All goods and services produced for overseas

consumption. Example, If a domestic producer is paid to make the chandelier for a foreign hotel, the payment would be counted in gross export.

M for import
M : gross imports.
Includes :: Any goods or services imported for consumption

Example, If the renovation of hotel involves the

purchase of a chandelier from abroad, that spending would be counted in gross imports