Free 720 words essay on GDP of India – Economy of India for school and college students.
The Gross Domestic Product (GDP) is the measure of national income and output for a given country’s economy. It is the measure of total expenditure for all final goods and services that have been produced in a country within a stipulated time frame. GDP aims to best capture the monetary value of a country’s economy. GDP of India was worth 2088.80 billion USD in 2015 which represents 3.37% of the world economy.
Determining GDP is complicated. However, it can be done in three ways, which should all, in principle, give the same result. The three ways are the Production approach, the Income approach, and the Expenditure approach. Amongst the three, the Production approach is the most direct which sums the output of every class of enterprise to arrive at the total. The Income approach works on the principle that the incomes of the productive factors must be equal to the value of their product, and thus, determines GDP by finding the sum of all producers’ income. The Expenditure approach however, works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to peoples’ total expenditure in buying things.
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The Economy of India stands as the Sixth largest in the world as measured by nominal GDP which was $2.25 trillion (nominal; 2016) and Third largest by Purchasing Power Parity (PPP) which was $8.72 trillion (PPP; 2016). The GDP growth in the FY16 was 7.6%, up from 7.2% a year ago. The Economic Survey tabled in Parliament on January 31st 2017, by Mr. Arun Jaitley, Union Minister for Finance, GOI, stated that the expected GDP growth in 2017-18 would be between 6.75 to 7.50 per cent. Thus, India is being reported as the fastest growing major economy in the world, outpacing even China.
Indian economy is classified in three sectors — Agriculture and allied, Industry and Services. Amongst this Agriculture sector includes Agriculture (Agriculture proper and Livestock), Forestry and Logging, Fishing and related activities. Industry includes Mining and Quarrying, Manufacturing, Electricity, Gas, Water supply, and Construction. Services include ‘Trade, hotels, transport, communication and services related to broadcasting’, ‘Financial, real estate & professional services’, ‘Public Administration, defence and other services’. The Services Sector is the dominant sector in India’s GDP. Apart from this, it has also attracted significant foreign investment into the country, contributed significantly to exports along with providing large-scale employment.
The Services Sector accounted for 45.4% of the GDP as estimated in FY16 whereas the Agriculture and Industry Sectors accounted for 16.5% and 29.8% respectively.
Within each country the GDP is normally measured by a national government statistical agency as the private sector organizations normally do not have access to the required informations.
India is divided in states and every state government takes charge of increasing the welfare of its economy. In India, Maharashtra is the wealthiest state with an annual nominal GDP of 330 billion USD which is 13.4% of total India’s GDP. Maharashtra is followed by Tamil Nadu (170 billion USD) and Uttar Pradesh (150 billion USD) in terms of GDP.
Per capita GDP is another approach that gives the Government an assessment of its people’s standard of living. It is calculated by dividing the total GDP by the country’s population.
Having discussed all the above, there are a few shortcomings of taking a look on a country’s economy by measuring GDP. Its most significant shortcoming is that it includes government spending alongside other voluntary market transactions as government spending are not always towards social welfare. Also, it does not account for productive non-market activities, e.g. an important activity like a mother rearing her child, a motor car mechanic repairing his own car whole day. Yet another shortcoming includes an increase in GDP with certain destructive events or activities like a massive hailstorm in some area. To add on to this list, GDP is a measure of quantitative aspect of the products and services. It fails to emphasize on the qualitative improvement in the products and services which accounts to economical welfare. The underground economy or economy in the hidden market which remains away from Government’s knowledge is another reason for GDP’s inefficiency. Thus, GDP tells a little about individual economic welfare. Everything included or accounted for in GDP, does not necessarily cause social welfare.