Calculation of India GDP

Calculating GDP is extremely important has the performance of the economy is fixed by means of this method. The results would help the country to forecast the economic progress, determine the demand and supply, understand the buying power of the people, the per capita income, the position of the economy in the global arena. The Indian GDP is calculated by the expenditure method.

By Calculating GDP the performance of the Indian economy can be determined. The GDP of the country states the number of goods and services produced in a financial year. It is the yardstick of measuring the functioning of the economy.

How to calculate GDP

The method of Calculating India GDP is the expenditure method, which is, GDP = consumption + investment + (government spending) + (exports-imports) and the formula is GDP = C + I + G + (X-M)
Where,

• “C” stands for consumption which includes personal expenditures pertaining to food, households, medical expenses, rent, etc
• “I” stands for business investment as capital which includes construction of a new mine, purchase of machinery and equipment for a factory, purchase of software, expenditure on new houses, buying goods and services but investments on financial products is not included as it falls under savings
• “G” stands for the total government expenditures on final goods and services which includes investment expenditure by the government, purchase of weapons for the military, and salaries of public servants
• “X” stands for gross exports which includes all goods and services produced for overseas consumption
• “M” stands for gross imports which includes any goods or services imported for consumption and it should be deducted to prevent from calculating foreign supply as domestic supply

Points to remember while calculating GDP

• Calculating India GDP has to be done cautiously pertaining to the diversity of the Indian Economy.
• There are different sectors contributing to the GDP in India such as agriculture, textile, manufacturing, information technology, telecommunication, petroleum, etc.
• The different sectors contributing to the India GDP are 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 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

Last Updated May 30, 2015