GDP CALCULATION - ECONOMY
News: Private consumption, rural demand to drive Q1 growth
What is in the news?
●
Recently, the Reserve
Bank of India has released its May 2023 bulletin.
Key takeaways from the news:
1. Drivers of the Quarter 1 Growth:
●
Private consumption,
●
Reviving rural demand,
●
Renewed buoyancy in
manufacturing on easing input cost pressures.
2. Inflation:
●
It states that headline
inflation eased below 5% in April 2023 for the first time since November 2021.
●
It said that the
corporate earnings were beating consensus expectations, with banking and
financial sectors posting strong revenue performance, aided by robust credit
growth.
3. GDP growth:
●
The quarter of FY24 is
expected to be driven by private consumption, supported by revival in rural
demand that is underway on the back of the encouraging developments in both the
Kharif marketing season of 2022-23 and the Rabi marketing season of 2023-24,
they said.
4. Prediction:
●
Sustained buoyancy in
services, especially contact intensive sectors, and moderating inflationary
pressures, will aid growth momentum.
Gross Domestic Product:
What is GDP?
●
The GDP measures the
monetary measure of all “final” goods and services, those that are bought by
the final user produced in a country in a given period.
Calculation of GDP:
●
GDP
= private consumption + gross investment + government investment + government
spending + (exports-imports).
○ All
the money Indians spent for their private consumption (that is, Private Final
Consumption Expenditure or PFCE)
○ All
the money the government spent on its current consumption, such as salaries
[Government Final Consumption Expenditure or GFCE]
○ All
the money spent towards investments to boost the productive capacity of the
economy. This includes business firms investing in factories or the governments
building roads and bridges [Gross Fixed Capital Expenditure]
○ The
net effect of exports (what foreigners spent on our goods) and imports (what
Indians spent on foreign goods) [Net Exports or NX.
●
GDP
= (GVA) + (Taxes earned by the government) — (Subsidies provided by the
government).
○ GVA
of a sector is defined as the value of output minus the value of its
intermediary inputs. This “value added” is shared among the primary factors of
production, labour and capital.
●
Calculated
by:
○ Ministry
of Statistics and Programme Implementation.
●
Base
Year:
○ The
last series changed the base to 2011-12
from 2004-05.