1.

Recap on GDP

2. GDP is the market value of all final goods and services produced within
an economy in a given period of time.

Let us suppose that an economy produces four apples and three oranges.

GDP = (Price of Apples X Quantity of Apples) + (Price of Oranges X Quantity

of Oranges)

GDP = (0.5 X 4) + (1 X 3)
GDP = 2+ 3 = 5
This is nominal GDP

Real GDP in 2020 = (2018 Price of Apples X 2020 Quantity of Apples) +

(2018 Price of Oranges X 2020 Quantity of Oranges)
We have taken 2018 as the base year for prices for calculating real GDP.

3. Real GDP vs. Nominal GDP: A Numerical Example

Prices and Quantities

Year Price of X Quantity of X Price of Y Quantity Y
2018 Tk. 1 100 Tk. 2 50
2019 Tk. 2 150 Tk. 3 100
2020 Tk. 3 200 Tk. 4 150

Calculating Nominal GDP

2018 (Tk. 1 per X * 100 X + Tk. 2 per Y * 50 Y) = Tk. 200
2019 (Tk. 2 per X * 150 X + Tk. 3 per Y * 100Y) = Tk. 600
2020 (Tk. 3 per X * 200 X +. Tk. 4 per Y * 150 Y) = Tk. 1200

Calculating Real GDP (Base Year 2018)

2018 (Tk. 1 per X * 100 X + Tk. 2 per Y * 50 Y) = Tk. 200
2019 (Tk. 1 per X * 150 X + Tk. 2 per Y * 100 Y) = Tk. 350
2020 (Tk. 1 per X * 200 X +. Tk. 2 per Y * 150 Y) = Tk. 500

Calculating the GDP Deflator

2018 (Tk. 200/Tk. 200) * 100 = 100
2019 (Tk. 600/Tk. 350) * 100 = 171
2020 (Tk. 1200/Tk. 500) * 100 = 240

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4. Components of GDP

Y = C + I + G + NX

where Y stands for GDP

C for consumption of household expenditure on goods and services: (1) non-

durable, (2) durable, and (3) service

I for investment for future use: (1) business fixed investment, (2) residential
investment and (3) inventory investment

G for government purchases

NX for net exports (X – M)

5. GDP Deflator = Nominal GDP/ Real GDP

6. Real GDP = Nominal GDP/ GDP Deflator

7. Other Measures of GDP

7.1 GNP = GDP + Factor Receipts from Abroad – Factor Payments to Abroad

7.2 NNP = GNP – Depreciation

8. Is GDP a Good Measure of Well-Being of People?

8.1 GDP is called the best single measure of the economic well-being of a
society. But it has certain limitations:

 GDP does not allow for the health of our children, the quality of their
education, or the joy of their play.
 It does not include the beauty of our poetry or the strength of our
marriages, the intelligence of our public debate or the integrity of our
public officials.
 It measures neither our courage, nor our wisdom, nor our devotion to the
country.
 It measures everything, in short, except that which makes life worthwhile.

8.2 Human development index (HDI): It is a composite index of life expectancy at

birth, education (mean years of schooling completed and expected years of
schooling upon entering the education system), and per capita gross national
income (GNI). The health dimension is assessed by life expectancy at birth, the
education dimension is measured by mean of years of schooling for adults aged
25 years and more, and expected years of schooling for children of school

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entering age. The standard of living dimension is measured by GNI per capita.
The scores for the three HDI dimension indices are then aggregated into a
composite index using geometric mean. However, GDP does not cover the first
two measures.

HDI in South Asia in 2020

Country HDI Life Expected Mean years GNI per Rank
(value) expectancy at years of of schooling capita (2017
birth (years) schoolin PPP $)
g
1. Sri Lanka 0.782 76.4 14.1 10.8 12578 75
2. Bhutan 0.666 71.8 13.2 5.2 9438 125
3. Bangladesh 0.661 72.4 12.4 7.4 5472 128
4. India 0.633 67.2 11.9 6.7 6590 130
5. Nepal 0.602 68.4 12.9 5.1 3877 144
6. Pakistan 0.544 66.1 8.7 4.5 4624 161
Source: UNDP (2022), Human Development Report 2021/2022

8.3 GDP hardly covers any of the 17 Sustainable development Goals (SDGs): 1.
No poverty, 2. Zero hunger, 3. Good health and well-being, 4. Quality education,
5. Gender equality, 6. Clean water and sanitation, 7. Affordable and clean
energy, 8. Decent work and economic growth, 9. Industry, innovation and
infrastructure, 10. Reduced inequalities, 11. Sustainable cities and communities,
12. Responsible consumption and production, 13. Climate action, 14. Life below
water, 15. Life on land, 16. Peace, justice and strong institutions, and 17.
Partnerships for the goals.

8.4 World Happiness Index: It is based on respondent ratings of their own lives,
which are then correlated with various quality of life factors. GDP has nothing to
do with the World Happiness Index.

2. A Note on Computing GDP in Bangladesh

Bangladesh Bureau of Statistics (BBS) annually publishes estimates of GDP at constant and
current prices. The base of the constant price series is periodically updated. Recently, the
BBS has updated the base year for the constant price estimates to 2015/16.

The most comprehensive measure of the total output in an economy is its gross
domestic product (GDP). It is the value of final goods and services produced by
an economy each year, and is simply the sum-total of personal consumption (C),
government expenditure on goods and services (G), Investments (I), and net
exports (X-M).

BBS uses the following two methods of estimating GDP, namely (1) the production
method, and (2) the expenditure method. Of these two methods, the production method,
estimating values added in all production and service activities, is the primary method of
GDP accounting in Bangladesh. It is primary in the sense that estimates according to this

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method are taken to be the actual ones in the event of a discrepancy between it and the
estimate according to the expenditure method.

Production accounts of GDP are estimated at current prices of each year. GDP deflator and
sectoral GDP deflators are obtained by dividing the current price GDP and its components by
the corresponding constant price estimates. Production accounts are estimated from
surveys of outputs and inputs. For example, crop output, which is by far the major part
of agriculture, is measured by multiplying estimated area under each crop by estimated
yield per hectare of cropped land.

BBS also estimates the expenditure account of GDP showing the standard components:
private and public consumption; private and public investment; exports and imports. Since
these components are estimated independently, there is an inevitable discrepancy between the
production and expenditure estimates of GDP. To reconcile the two, the difference between
them is called “statistical discrepancy” and added to or subtracted from the independently
estimated components of expenditure to arrive at the aggregate expenditure estimate of GDP.
The expenditure account is naturally estimated at current prices first and then converted into
constant price estimates by using appropriate deflators which too are independently
estimated.

Bangladesh follows the United Nations Classification of Individual Consumption According

to Purpose (COICOP) 2018 as an integral part of the System of National Accounts (SNA).

COICOP 2018 Broad Structure

Code Description
01 Food and non-alcoholic beverages
02 Alcoholic beverages, tobacco and narcotics
03 Clothing
04 Housing, water, electricity, gas and other fuels
05 Furnishings, household equipment and routine household maintenance
06 Health
07 Transport
08 Information and communication
09 Recreation, sport and culture
10 Education services
11 Restaurants and accommodation services
12 Insurance and financial services
13 Personal care, social protection and miscellaneous goods and services
14 Individual consumption expenditure of non-profit institutions serving
households (NPISHS)
15 Individual consumption expenditure of general government

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 Table 1. GDP, GNI (in crore Taka) and Per capita GDP/GNI of Bangladesh
GDP/GNI 2017-18 2018-19 2019-20 2020-21 2021-22 (p)
3530184.
GDP at current price 2639247.9 2951428.8 3170469.4 8 3976462.2
3715996.
GNI 2744791.2 3072323.5 3301701.2 6 4124071.1
Population 16.37 16.56 16.74 16.91 17.08
Per capita GDP (Tk.) 161274 178280 189361 208751 232828
Per capita GNI (Tk.) 167723 185583 197199 219738 241470
Per capita GDP (USD) 1964 2122 2234 2462 2723
Per capita GNI (USD) 2043 2209 2326 2591 2824
GDP at constant price 2833944.
(Base: 2015-16) 2374574 2561735.6 2650064.9 4 3039272.9
GDP growth rate (%) 7.32 7.88 3.45 6.94 7.25
Source: Bangladesh Bureau of
Statistics

Table 2. GDP by Expenditure Categories at Constant Prices (in crore Taka) (Base: 2015-16)
GDP 2017-18 2018-19 2019-20 2020-21 2021-22 (p)
2052408.
Consumption (1) 1751256.8 1848027.8 1901780.6 9 2310355.7
Private 1613846.1 1692205.1 1742917.1 1882620 2130729.9
General
Government 137410.7 155822.7 158863.5 169788.9 179625.8
Investment (2) 762726.2 815203.9 847370.8 915929.7 1007485.9
Private 595871 647234.3 648831.5 699361.5 764683.1
Public 166855.2 167969.6 198539.3 216568.2 242802.8
Resource Balance
(NX) (3) - (4) -170139.6 -138040.2 -142729 -181328.5 -328931.3
Exports (3) 300972.2 335453 276740.7 302177.2 372399.6
Imports (4) 471111.8 473493.2 419469.7 483505.7 701330.9
GD Expenditure at 2787010.
constant prices 2343843.5 2525191.5 2606422.4 1 2988910.3
GD Product at 2833944.
constant prices 2374574 2561735.6 2650064.9 4 3039272.9
Statistical Discrepancy 30730.5 36544.1 43642.5 46934.3 50362.6
Source: Bangladesh Bureau of
Statistics