What is Gross Domestic Product (GDP)

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Saurabh Guptahttp://karekaise.in
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What is Gross Domestic Product (GDP)? How is GDP calculated? What are GNPs? What are NNPs? You will get detailed information about many such important points in this post. Do read this post completely.

Indian economy is the third largest economy in the world. It is ranked 2nd in the world in terms population. There has been very rapid economic progress in India since 1991 when the policy of liberalization and economic reforms has been implemented and India has emerged as an economic superpower of the world. Indian economy is getting better and stronger day by day.

What is GDP?

GDP Definition – The total market or monetary value of all final goods and services produced within a country’s borders in any given period of time, usually a year, is called Gross Domestic Product (GDP) of that country. .

We use this equation to calculate GDP (Gross Domestic Product), its detailed information is given below.

GDP (Gross Domestic Product) = Consumption + Gross Investment + Government Spending + (Exports – Imports)

What is GNP?

It is also used in national income accounting, if that income is deducted from the gross domestic product, which is generated in the country itself, but is receivable to foreign countries and the income received by the country but earned abroad is added. If given, Gross National Product (GNP) is obtained.

You can understand GNP more easily with the help of example.

A foreign singer comes to India and sings a song and the income (money) he will get from that song and take it to his country will be deducted from GDP and if an Indian singer sings a song abroad and the income will be received from it. And will bring his country, it will be added to GDP. This is how Gross National Product is calculated.

GNP can be represented by the following equation.



X = Income earned by countrymen abroad

M = Income earned by foreigners in the country

What is NNP?

Net National Product is determined after deducting the amount of depreciation from the Gross National Product.


How is GDP calculated?

GDP can be calculated in 3 ways.

  • Expenditure Method of Calculating Gross Domestic Product .
  • Income Method of Computing GDP.
  • Production method of calculating GDP.

Expenditure method of counting GDP

The easiest and most common way to calculate gross domestic product (GDP) is the expenditure method.

GDP (Gross Domestic Product) = Consumption + Gross Investment + Government Spending + (Exports – Imports)


GDP = C + I + G + (X − M)

C (Consumption) – This includes most of the household expenses like food, rent, medical expenses and other such expenses, but does not include the new house.

I (Investment) – is defined as the investment made by the business or household in the form of capital. If money is converted into goods or services, it is investment.

G (Government Expenditure) – This includes salaries of government employees, purchase of weapons for the army and investment expenditure by the government.

X (Export) – Exports are added to GDP, under this the goods or services produced for consumption by other countries are counted.

M (Import) – Imports are subtracted. It includes imported goods and services.

Method of counting GDP

Under the income method, you will calculate everyone’s income, but there will be some people who are running their business on credit, or someone is getting late payment, that is why this method is not sustainable.

Using the income approach, factor income is added to the factors of production in a society to calculate GDP.

These include.

Employee’s Compensation + Corporate Profits + Owner’s Income + Rental Income + Net Interest

Method of counting GDP

(Value of sale of goods) – (The purchase of intermediate goods to produce the goods sold)

Farmer produces wheat and sells 10 kgs for Rs 200.

The line of flour bought it, brewed it and sold it to a bakery for Rs 250. (50 forms added to last purchase)

The bakery made his bread, made biscuits and sold it to us for Rs 350 (Rs 100 added to the previous purchase)

So what happened to the total GDP?

350 – 250 = 100

250 – 200 = 50

200 – 0 = 200

Total = 350 (Total GDP)


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