GDP India
Meaning of GDP
GDP or gross domestic product is one of the primary indicators used to measure the health of a country's economy. It indicates the total dollar value of all the goods and services produced over a specific period of time - one can think of this as the size of the economy. Generally, GDP is expressed as a comparison with the previous quarter or year. For instance, if the year-to-year GDP is up 3%, this indicates that the economy has grown by 3% in comparison to the last year.
Measuring GDP is a little complicated. It is best done by the economists. Basically, the calculation can be done in any of the two ways: either by summing up what everyone earned in a given year (known as income approach), or by summing up what everyone spent (known as expenditure method). Reasonably, both measures should come to roughly the same total.
The income approach, that is sometimes referred to as GDP (I), is calculated by summing up the total compensation to employees, gross profits for incorporated and non incorporated firms, and the taxes less any subsidies. Expenditure method is a more common approach and is computed by adding total investment, consumption, government spending and the net exports.
As one can see, economic production and growth, what GDP indicates, has a great impact on nearly everyone within that economy. For instance, when the economy is good and healthy, there will be low unemployment and wage increases as businesses require labor to meet the growing economy. A considerable change in GDP, whether up or down, usually has a significant effect on stock market as well. A bad economy usually means lesser profits for companies, which in turn means lower stock prices. Investors are really influenced by negative GDP growth, which is one of the factors that economists use to determine whether an economy is in recession or not.
Economic Survey: India capable of achieving 2009 GDP Growth of 7 %
New Delhi, India, 2 July 2009: India can achieve 7 Per Cent GDP growth in year 2009, and then return its previous 9 per cent plus showing from 2010. However, this is possible only if major financial reforms are enacted. This was the verdict of annual India Economic Survey of 2008 - 2009.
The report also stated that 'policy and institutional bottlenecks' were responsible for holding back the economy. Further it stated that it is necessary for the government to revisit the agenda for imminent economic reforms in the first place with a view to renew the growth momentum.
The report has also cited the need to remove fuel subsidies and speed up infrastructure development. The Eleventh Five-Year Plan has anticipated an investment requirement of US$500bn in infrastructure for broad-based and comprehensive growth. The report stated that achieving this is a challenging task. Particularly, reforms are required to help private investors join the Public-Private-Partnership (PPP), which is the key pillar of infrastructure development plan.
The Economic Survey has also asked for expediting the Banking Regulations Bill for allowing greater flexibility and oversight, thus allowing increased foreign direct investment (FDI) in banks as well as the retail sector, and removing the ban on commodity futures. High Net Worth individuals [HNIs] should be permitted to invest directly in capital markets rather than be constrained by participatory notes. The spot, futures and long-term debt markets should also be liberalized, including the investment rules prevailing for insurance and pension plans. To further help long-term debt markets, the Survey suggested that the repurchase of corporate bonds be allowed, thus allowing greater liquidity for investors and private enterprise alike.
India achieved over 9 % GDP annual growth from year 2006 - 2008. The Economic Survey believed that with reforms in place, 2010 may see growth rates of at least 8.5 per cent, and that the trend would continue in the medium term.
The report believed that inflation was no longer a cause to worry about. This may be due to the fact that the latest Wholesale Price Index shows prices 1.3 per cent less than what they were a year ago. If necessary economic reforms are put in place, then India's growth would continue at a significant pace.
| 