GDP

Siddharth Arora
Sep 19, 2023
IIT-BHU, Varanasi
 GDP

Source: Business Insider website

GDP India
 What is Gross Domestic Product
(GDP)?
• Gross domestic product (GDP) is the total
valuation of final goods and services produced
within the geographical borders of a country
during a specified period (usually a year).
• The GDP is a statistical indicator that defines
the economic progress and development of a
country. Percentage growth in the GDP during
a quarter is considered as the standard of
economic growth.
 Types of GDP Measurements
• Real GDP
• Nominal GDP
• GDP per Capita
 Income Method
• Gross Domestic Income
• Compensation to employees or compensation of employees (CE)
– It is the total wages before tax that are paid to employees by employers during a specific
period.
• Net production and product taxes
– Production taxes or subsidies are levied on a firm engaged in manufacturing a product or
products. Product taxes or subsidies are charged on the volume of total output.
• Consumption of fixed capital (CFC)
– Consumption of fixed capital (CFC) is the depreciation of fixed assets (plant, machinery, etc.),
owned by a firm, during a financial period.
• Gross operating surplus (GOS) or gross mixed income (GMI)
– Gross operating surplus (GOS) is the surplus income generated by a firm minus the payroll to
the workforce. Gross mixed income is the GOS earned by sole proprietorships, unincorporated
enterprises, farming enterprises, and professionals (doctors, lawyers, CAs, etc.).
• GDP = Total income (from salary, profits, etc.) + tax + depreciation + gross
operating surplus.
 Expenditure Method
• Consumption expenditure (Private and government)
– Consumption expenditure is the cumulative final consumption spending of private households
and the government.
– The consumption expenditure of both private households and the government is considered
when determining nominal GDP.
• Investments
– Investments are the expenditures that businesses and households spend on assets. For
households, these usually include purchasing/constructing a new home. For businesses, it
includes plants, machinery, equipment, etc.
• Government expenditure
– This includes all expenses incurred by the government for the development of a country, such
as education, infrastructure, medication, etc.
• Net exports (exports minus imports)
– Net exports include the goods and services produced by a country, which are exported
overseas minus the imports.
• The formula for calculation of GDP basis expenditure approach is –
– GDP = C + I + G+ NX.
– Where C is the consumption expenditure, G is government expenditure, I is the investment,
and NX is the net exports.
 GDP
• India's Central Statistic Office calculates the
nation's gross domestic product (GDP).
• India's GDP is calculated with two different
methods, one based on economic activity (at
factor cost), and the second on expenditure (at
market prices).
– The factor cost method assesses the performance of
eight different industries.
– The expenditure-based method indicates how
different areas of the economy are performing, such
as trade, investments, and personal consumption.
 Data Collection Process
• The Central Statistics Office under the Ministry of Statistics and Program
Implementation is responsible for macroeconomic data gathering and
statistical record keeping.
• Its processes involve conducting an annual survey of industries and
compilation of various indexes such as the Industrial Production Index (IPI)
and the Consumer Price Index (CPI).
• The Central Statistics Office coordinates with various government agencies
and departments to collect and compile the data required to calculate the
GDP and other statistics.
• For example, data points specific to manufacturing, crop yields, or
commodities—which are used for the Wholesale Price Index (WPI) and CPI
calculations—are gathered and calibrated by the Price Monitoring Cell in
the Department of Consumer Affairs under the Ministry of Consumer
Affairs.
• Similarly, production-related data used for calculating IPI is sourced from
the Industrial Statistics Unit of the Department of Industrial Policy and
Promotion under the Ministry of Commerce and Industry.
 Source Agencies
• Agriculture
– The principal source agency for data on the agriculture sector is the Directorate of Economics and Statistics, Ministry of
Agriculture. Out of about 78 crops, crop-groups for which estimates of value of output are prepared, data on area and yield in
respect of 49 principal crops are available with a reasonable time lag from the DESMOA. For other crops, although the area
figures are available from the DESMOA, production estimates are based on the information supplied by the State Government
sources and ad hoc reports. Data on State level weighted average prices of crops, which are used for evaluating the
corresponding output of State level crops, are made available by the State DESs.
– The principal sources of data for inputs are the results of the Cost of Cultivation Studies (CCS), State DESs, State Agriculture
Departments, Central Electricity Authority, Fertiliser Association of India and Pesticides Association of India.
• Livestock
– The source agency for the data on milk, egg and wool is the Department of Animal Husbandry and Dairying (DAHD), which
collects this information through the Integrated Sample Survey conducted by the State AHDs.
– Estimates of meat and the number of slaughtered and fallen animals are available from the State AHDs and DESs and that of the
livestock population from the DESMOA and State AHDs from the results of Livestock Censuses.
– Estimates of silk and honey are available from the respective Boards and State AHD.
• Forestry
– The sources for data on production of forest products (industrial wood, fuel-wood and minor forest products) are the various
Forest Departments of State Governments (SFD). However, the estimates of production of fuel-wood reported by the SFDs are
considered totally unreliable as most of the fuel-wood is lifted in an unauthorised way. For the purpose of estimation of GDP, the
output of fuel-wood is estimated from the consumption side making use of the results of NSS on consumption expenditure of
households.
• Fishing
– The main source of data for inland fishing, marine fishing and production of prawns is the Ministry of Agriculture.
– The source agencies for data on other ancillary activities like sun drying of fish and salting of fish are the State Fisheries
Departments. Data on prices are made available by the DESs.

Data Source: MOSPI Official Website

 Source Agencies
• Mining
– The source agencies for the major minerals are the Indian Bureau of Mines (IBM), Coal India Ltd. (CIL) and its
subsidiaries, and Oil and Natural Gas Corporation (ONGC). The information on minor minerals is obtained
from the State Geological Departments. The information on the material inputs is available from the Office
of Coal Controller, IBM, ONGC and Oil India Limited. An Enterprise Survey conducted in 1992 is the new
source on minor minerals.
• Registered Manufacturing
– The registered sector of manufacturing covers all factories employing 10 or more workers and using power
and those employing 20 or more persons but not using power, and bidi and cigar establishments registered
under Bidi and Cigar Workers’ Act, 1966 employing 10 or more workers using power and 20 or more workers
but not using power.
– Data on products and by-products of the factories covered under Factories’ Act, 1948 and material inputs
are collected annually through the Annual Survey of Industries (ASI) by the CSO.
– Factories employing 100 persons or more are covered on a census basis and other factories are covered on a
sample basis. Non-response is taken care of by adjusting the estimates of GDP on the basis of the number of
workers in the non-responding units assuming that the gross value added per worker in the responding and
non-responding unit is of the same order.
• Unregistered Manufacturing
– Data from unregistered manufacturing (factories other than those covered under the ASI) is not collected on
an annual basis. Data from such units is collected once in five years on a sample basis through the Follow-up
Surveys of the Economic Census.
– Directory Establishments employing 6 persons and more and Non-Directory establishments employing 1 to 5
persons and Own-account Enterprise with no hired worker are covered separately in the Follow-up Surveys.
– The Index of Industrial Production (IIP) is generally used for extrapolating the benchmark estimates.
 Source Agencies
• Electricity, Gas and water supply
– Information on output/sales of and material inputs into electricity, gas supply by pipeline and water supply, are available in
respect of departmental undertakings, Central and State Power Corporations, State Electricity Boards. For data on gobar gas, the
source agencies are the Ministry of Non-conventional Energy and the Khadi & Village Industries Commission (KVIC). Estimates of
water supply are based on the data of responding municipalities and estimates of workforce engaged in this activity.
• Construction
– Information on current production exports and imports and intermediate consumption of basic construction materials are
available from various official sources. Information on the other construction materials is based on the norms provided by
National Buildings Organisation (NBO), Central Public Works Department (CPWD) and Central Building Research Institute (CBRI)
on various types of constructions namely, residential buildings, non-residential buildings, roads, bridges, and the like.
Information on expenditures made on the kutcha construction in respect of the public sector is culled out from the budget
documents of the administrative departments and annual reports and DCUs and NDCUs. In case of the private corporate sector,
for kutcha construction, the information on construction activities in plantations of Tea, Coffee and Rubber is taken from the
Tea, Coffee and Rubber Boards. The sources of information for the household sector are the All-India Debt and Investment
Survey (AIDIS) and some old NSS reports.
• Trade, hotels and restaurants
– For the public sector components of Trade, Hotels and Restaurants, information on factor incomes is available in the budget
documents/annual reports of the departmental and non-departmental commercial undertakings. For the organised private
sector components, estimates of value added and work force are taken from the Reserve Bank of India (RBI)’s, Company Finance
Studies and the publications of the Directorate General of Employment and Training (DGE&T). For the unorganised segments of
trade and hotels and restaurants, benchmark estimate (prepared on the basis of working force and per worker value added) is
moved with the help of a physical indicator namely, the Gross Trading Income. The per worker value added information is
available from the Enterprise Surveys conducted quinquennially by the CSO/NSSO.
 Source Agencies
• Transport, Storage and Communication
– The activities of transport services by railways and other means, and storage and communication are compiled separately for the
public sector, private organised sector and unorganised sector.
– For the public sector component, the requirements relating to factor incomes, capital formation and other aggregates are based
on the budget documents and annual reports of the departmental and non-departmental commercial undertakings.
– For the private sector, particularly the private shipping companies and air transport, the annual reports of the companies are
available which provide the required information for compiling GVA and other aggregates. For the unorganised segments of
other activities namely, mechanised road transport, non-mechanised road transport, sailing vessels other than ships, the services
incidental to transport and storage, GDP estimates are built up using estimates of workforce and per worker value added from
bench mark surveys. Estimates for years other than the benchmark survey year are made on the basis of appropriate physical
indicators, like commercial vehicles registered and cargo handled at major ports.
• Banking and Insurance
– As most of the banking and insurance activities are in the public sector, requisite data are available from the annual reports.
Also, the RBI provides information on the banks including the Reserve Bank. The information on cooperative credit societies is
available from the Statements Relating to the Cooperative Movement in India published by the National Bank for Agricultural
and Rural Development (NABARD).
• Services
– In public administration and defence, information on compensation of employees is available from the budget documents.
However, the requisite data in respect of local bodies are not available. The estimates in respect of local bodies are prepared on
the basis of transfers made by the State Government to the local bodies. For the rest of the services activities, the estimates of
unorganised component are built-up using various sources of data, like Population Census (for dwellings), NSS (for rent per
dwelling), Bar Council (for number of registered advocates), Ministry of Human Resource Development (for recognised
educational institutions), Enterprise Surveys (for value added per worker) and Directorate General of Employment and Training
(DGE&T) (for number of workers in the organised sector, which is required to derive the workforce in the unorganised sector)
and other ad hoc sources.
 The Factor Cost Figure
• The factor cost figure is calculated by collecting data for the
net change in value for each sector during a particular time
period. The following eight industry sectors are considered
in this cost:
1. Agriculture, forestry, and fishing
2. Mining and quarrying
3. Manufacturing
4. Electricity, gas, water supply, and other utility services
5. Construction
6. Trade, hotels, transport, communication, and broadcasting
7. Financial, real estate, and professional services
8. Public administration, defence, and other services
 The Expenditure Figure
• The expenditure (at market prices) method
involves summing the domestic expenditure
on final goods and services across various
streams during a particular time period. It
includes consideration of expenses towards
household consumption, net investments (i.e.,
capital formation), government costs, and net
trade (exports minus imports).
 Timelines for India's GDP
• Each quarter’s data are released with a lag of two
months from the last working day of the quarter.
• Annual GDP data is released on May 31, with a
lag of two months. (The financial year in India
follows an April-to-March schedule.)
• The first figures released are quarterly estimates.
• As more and more accurate data sets become
available, the calculated figures are revised to
final numbers.
 GDP vs NDP
• Net domestic product (NDP) is the total amount
of final goods and services produced by a
country, minus depreciation. Thus, the NDP can
be achieved by subtracting depreciation from the
gross domestic product.
• On the other hand, net national product (NNP) is
the total valuation of final goods and services
produced by a nation’s citizens domestically and
internationally, minus depreciation. Thus, NNP
can be found by subtracting depreciation from
GNP.
 Limitations of GDP
• Exclusions of non-market transactions
• Does not account for the standard of living
• Does not account for externalities
• Does not account for income inequality
 Detailed Reading on Official Site
• https://www.mospi.gov.in/133-gross-
domestic-product