Trend of National Income

Gross Domestic Product (GDP)

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.

The calculation of GDP 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.

SO WE UNDERSTAND THAT The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and output for a given country's economy. GDP can be defined in three ways, all of which are conceptually identical. First, it is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time (usually a 365-day year). Second, it is equal to the sum of the value added at every stage of production (the intermediate stages) by all the industries within a country, plus taxes less subsidies on products, in the period. Third, it is equal to the sum of the income generated by production in the country in the period--that is, compensation of employees, taxes on production and imports less subsidies, and gross operating surplus (or profits).

The Gross Domestic Product (GDP) in India expanded 5.3 percent in the first quarter of 2012 over the same quarter of the previous year. Historically, from 2000 until 2012, India GDP Growth Rate averaged 7.3700 Percent reaching