Context

• The World Bank has projected a 7% growth for the Indian economy in the current fiscal year, up from 6.6%.
• To reach its $1 trillion merchandise export target by 2030, India must diversify its exports and take advantage of global value chains.  

What is Gross Domestic Product?

• It is the total monetary value of all final goods and services produced in a country over a given time period (usually a year).
• GDP measures how much wealth a country produces in a year. It is a measure of a country's economic activity, people's income and standard of living.

Types of GDP:

• Nominal GDP: It measures the value of all goods and services expressed in current prices (prevailing prices of the current year).
• Real GDP: Unlike nominal GDP, it represents the value of all goods and services expressed at the prices of a base year.

Calculation of GDP in India:

• Many institutions and organizations work together to calculate GDP in India. Mainly the Central Statistics Office (CSO) performs this responsibility.

There are mainly two methods used to calculate GDP in India:

• Production Method: This method adds up the value of all final goods and services produced in different sectors (agriculture, industry, services).
• Expenditure Method: This method adds up consumption (domestic and government), investment, government expenditure and net exports (exports minus imports).

Key points involved in the calculation of GDP:

• Base Year: A base year is fixed for calculating GDP whose prices are considered as the base. In India, changes are made in the base year from time to time (current base year is 2011-12 and now the Advisory Committee has recommended 2020-21 as the new base year).
• Price Index: Various price indexes are used to reduce the effect of inflation.
• Statistical Survey: Statistical surveys are conducted in various fields to calculate GDP.

Calculation formula: Y = C + I + G + (X − M)

• Y = Gross Domestic Product
• C = Consumption
• I = Investment
• G = Government spending
• X = Exports
• M = Imports

World Bank:

• Former official name: International Bank for Reconstruction and Development (IBRD)
• Founded: July 1944, Bretton Woods, New Hampshire, United States
• Chairman: Ajay Banga
• Headquarters: Washington, D.C., United States