What is the full form of GDP?

Answer:

GDP: Gross Domestic Product

The full form of GDP is Gross Domestic Product. It is the market value of all final goods and services within the limits of a nation in a year. It is used to measure the size of a nation’s economy and overall growth or decline in the economy. In India, there are three main sectors that contribute to GDP: industry, service sector and agriculture which includes allied services.

How to calculate GDP

GDP is calculated in three ways. They are Production approach, Income approach and Expenditure approach.

• The production approach is the most direct one which calculates the total product output of each class.
• The expenditure approach calculates the total value of the products like steel, coal, fridge, TV among many others bought by an individual or consumer which should be equal to the expenditure of the things bought.
• The Income approach calculates the sum of all the producers’ incomes where the incomes of the productive factors are equal to the value of their product.

Calculates GDP by expenditure method as follows:

GDP=C+I+G+(X-M)

C: Consumption inside the country
I: Investment inside the country
G: Government expenditure
X: Exports
M: Imports

Consumption: It includes personal expenses related to food, household, medical expenses, rent etc. It is a major contributor to the Indian GDP. It contributes about 60% of GDP.

Investment: Investment in the form of capital which includes the construction of a new mine, purchase of machinery and equipment for a factory, purchase of software, spending on new homes, buying goods and services Is included but does not include investment in financial products as it falls under savings. It is the second-largest contributor to GDP. It contributes about 32% to GDP.

Government expenditure: Government expenditure on final goods and services, including investment expenditure by the government on the purchase of arms for the military, salaries of public servants, etc. Government spending is very important during an economic crisis. The government comes as a hedge to increase consumption or investment during adverse economic conditions.

Export: which includes all goods and services produced for foreign consumption. It has a 20% weightage in the economy. It has the potential to generate mass employment through textiles, gems and jewelery.

Import: which includes any item or service imported for consumption. It contributes about 26%.

Other full forms of GDP