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 GDP Growth of 8.5% in 2010.

The Union Finance Minister Pranab Mukherjee said that the country has overcome the effects of economic slowdown across the globe. The GDP is expected to grow at 8.5% during fiscal year (FY) 2010-11, +0.25% or -0.25%.

India achieved over 9% GDP annual growth for the fiscal years 2005-06, 2006-07 and 2007-08. There was a major slowdown in the second half of 2008-09, because of the emerging financial crisis in the industrialized nations in 2007 which has spread to the real economy across the world. The GDP growth rate in 2008-09 was 6.7%, with the growth of around 6% in the last two quarters.

The fiscal year 2009-10 began as a difficult one. It was also a year for the policymakers to reckon the situation and take a risk of giving fiscal expansion to counteract the negative effect of the global slowdown. However, the latter half of year 2009-10 saw the economy recover from the slowdown. This recovery was remarkable not only in terms of overall growth but also in terms of some fundamentals that justify optimism for the Indian economy. The GDP for the year 2009-10 was 7.2%, which is a remarkable recovery.

According to the economic survey 2009-10, India can become the fastest growing economy in the world in the next four years. The peak custom duty has been lowered from 10% to 7.5%. Revenues are expected to be 820-850 Crores in FY 2010-11. India is the 10th largest gold holding nation at 557.7 tonnes. India is the world's 2nd largest wireless network with 525.1 million mobile users.

On the downside, rising food inflation is a major concern. There has been high double-digit food inflation in 2009-10. The food inflation in 2009-10 was close to 18% and it may spread. Along with that the hike in the fuel prices will impact inflation. Also, the fiscal deficit is expected to go up to 6.8% of GDP for the current year.

The Economic Survey is optimistic on the overall growth for the coming years. It believed that by bringing the reforms in place, 2010-11 may have growth of at least 8.5%, and the trend would continue. The economy would be able to quickly revert to the GDP growth rate of 9% and then will find the means to overcome the 'double-digit growth barrier'.