What is GDP? (English)
You can find lots of definition about GDP in Google, But still confusion remains.
I can give you a sweet and simple descriptttion on GDP, and yes you should have to know about it.
1st (Intro) - Every day we see and listen in newspaper that today GDP has grown by 3%, 4%, USA GDP something, India's something. So what is the GDP?
The full form of GDP, I think everyone knows very well - Gross Domestic Product, and the formula of GDP we can easily find it by the help of Mr Google.
But nowhere, it has been explained in Layman language.
Once my mother asked: Every day I see in TV and paper GDP. What is the GDP. Lo karlo bat, ab toh main gaya, how do I make her understand !!
2nd (what is GDP?) - The definition of GDP goes like this:
DEFINITION of 'Gross Domestic Product - GDP' The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis.
Formula:
Where
- R : rents,
- I : interests,
- P : profits,
- SA : statistical adjustments,
- W : wages.
Are you getting something?
3rd (in simple way) - GDP actually is the amount of money that exchanges in hand.
That's mean- Hum log jo paisa likhit main adan pradan karte hain, use agar jor diya jaiye toh usey GDP kahete hain.
Let see how it happens- for eg, A standing tree doesn't itself contribute GDP. The moment we cut it, GDP increases. The monitory & economic transaction involved in the process starting from cutting the tree transforming it into finished goods to selling into market, is the effect on GDP.
4th (GDP growth) - We usually hear saying, we have increased our GDP by certain percentage. And if we invest capital in certain projects, our GDP will grow.
So what is GDP growth? ye jada complex kuch nahi hain, sidhe sidhe bolne se- GDP value is basically compared with previous year/quarter, and positive result shows GDP increase and vise verse. Eg. Increase by GDP 3% means the value of percent GDP has increased by 3% from previous year/quarter.
Small clarification: We should not compare a country's GDP with another country's. Because in 2013 India GDP growth rate was 5.6% whereas the same of America(USA) was 1.3%. But this doesn't mean that America(USA) has performed badly. Value wise India's GDP was 1.86 USD Trillion in 2013 whereas American (USA) GDP was 16.8 USD trillion for the same year, i.e. almost 9 times more than India.
5th (fact) - Initially I explained that standing tree is equivalent to no GDP. The moment we cut it GDP increase.
*Above statement is intended for simple understanding, please I am strongly against cutting tree.
Few ideas to increase GDP:
1) If you want to grow GDP pollute the River. Sarcastically speaking but it will help me in making you better understand how it works.
If the River is clean, it will have no impact on GDP (like the standing tree) and if we pollute the River, GDP will grow by not once, not twice, but Three times. Let see how:
We all know that firstly Industrialization helps in GDP growth. Secondly now waste effluent from the industries flows into the River, in order to clean the River, govt invest thousand of crores & for that increase the GDP. Thirdly, drinking the polluted water effect our health & we spend money for doctor fees.
(To sum up we can say, investment and our expenditure helps in growth of GDP)
2) Russia GDP is very week, therefore theirs budget always mention that there won't be anything duty levied on CIGARETTE and ALCOHOL, which form to negative way to increase GDP.
6th (end) - I don't know how much my article has succeeded in explaining what is the GDP to you all.
Now onwards, if any Minister and any person speaks about GDP growth, I would urge/request all of you to enquire.
CAclubindia
