Skip to main content

How is GDP calculated in India?

We often come across the news headlines about rise or fall in GDP, commonly referred to as growth rate of a country. But what is GDP and how is it calculated?

What is Gross Domestic Product (GDP)?

Gross Domestic Product (GDP) is the value of all final goods and services produced in the domestic territory of a country during a financial year. 

How is GDP calculated?

GDP is measured at –

  1. Constant prices (at prices of base year 2011-12) also known as Real GDP
  2. Current prices also known as Nominal GDP

When growth rate of a country is talked about, it refers to rise or fall in GDP (at constant prices).

GDP can be calculated using following methods –

  1. Income / production / supply-side components
  2. Expenditure components

GDP calculation using income / production / supply-side components

GDP = GVA at basic prices (+) Net taxes on products

Gross Value Added (GVA) at basic prices

Gross Value Added (GVA) measures the difference between the value of the final goods and the cost of ingredients used in its production, net of taxes and subsidies. Basic price is the amount receivable by the producer (seller) from the buyer for a unit of a good or service produced after deducting taxes payable and adding the subsidy receivable on that unit.

GVA at basic prices = CE (+) OS/MI (+) CFC (+) Production taxes (-) Production subsidies 

Where, 

  • CE – Compensation of Employees
  • OS / MI – Operating Surplus / Mixed Income – difference between revenue and expenditure of corporates / non-corporates enterprises
  • CFC – Consumption of Fixed Capital i.e. Depreciation
  • Production taxes or subsidies are paid or received with relation to production and are independent of the volume of actual production. Examples of production taxes are land revenues, stamps, and registration fees. Examples of production subsidies are subsidies to railways, subsidies to village and small industries.

GVA of following sectors is taken into account for calculation of GDP–

  1. Agriculture, Forestry & Fishing
  2. Mining & Quarrying
  3. Manufacturing
  4. Electricity, Gas, Water Supply & Other Utility Services 
  5. Construction 
  6. Trade, Hotels, Transport, Communication & Services related to Broadcasting 
  7. Financial, Real Estate & Professional Services 
  8. Public Administration, Defence & Other Services

Net taxes on products

Net taxes on product = product taxes (-) product subsidies

Product taxes or subsidies are paid or received on per unit of product. Examples of product taxes are excise tax, service tax, import duty, etc. Examples of product subsidies are food, petroleum, and fertilizer subsidies; interest subsidies given to farmers, households, etc.

GDP calculation using expenditure components

GDP = Private Final Consumption Expenditure (PFCE) + Government Final Consumption Expenditure (GFCE) + Gross Fixed Capital Formation (GFCF) + Change in Stocks (CIS) + Valuables + Net Exports (i.e. Exports minus Imports) + Discrepancies

What is Nominal and Real GDP / GVA?

  • Nominal GDP / GVA = GDP / GVA at current prices
  • Real GDP / GVA = GDP / GVA at constant prices = GDP / GVA after adjusting for inflation

Domestic Product

  • Gross Domestic Product (GDP) = GVA at basic prices (+) Net taxes on products
  • Net Domestic Product (NDP) = GDP (-) Depreciation

National Income

  • Gross National Income (GNI) = GDP (+) Net primary income from abroad (receipts minus payments)
  • Net National Income (NNI) = GNI (-) Depreciation
  • Net National Income (NNI) = NDP (+) Net primary income from abroad (receipts minus payments)
  • Primary Incomes = Compensation of Employees (+) Property and Entrepreneurial Income

National Disposable Income

  • Gross National Disposable Income (GNDI) = GNI (+) other net current transfers from abroad (receipts minus payments)
  • Net National Disposable Income (NNDI) = GNI (-) Depreciation
  • Net National Disposable Income (NNDI) = NNI (+) other net current transfers from abroad (receipts minus payments)
  • Other Current Transfers refers to current transfers other than the primary incomes.

Who publishes GDP and national income data? 

National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, Government of India, releases the Provisional Estimates (PE) of National Income as well as Quarterly Estimates of GDP, along with the corresponding estimates of expenditure components of GDP both at Constant (2011-12) and Current Prices in accordance with the release calendar of National Accounts.

Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels

Labels:

Comments

Post a Comment

Popular Posts

RBIDATA Mobile App by RBI

Reserve Bank of India (RBI) has launched RBIDATA Mobile App. What is RBIDATA Mobile App? RBIDATA Mobile App offers macroeconomic and financial statistics relating to the Indian economy in a user-friendly and visually engaging format. This app offers quick access to the Database on the Indian Economy (DBIE – https://data.rbi.org.in ) portal and aims to serve the researchers, students, and the general public.  The key features of the app include – Access to over 11,000 different series of economic data to give a comprehensive view of the Indian economy. Users can view time series data in graphs / charts and download data for analysis. The app includes details such as data source, unit of measurement, frequency, recent updates. Additional notes are also provided to help users understand the graphs / charts better. The ‘Popular Reports’ section features a series of frequently viewed reports. ‘Search’ option allows users to access data directly from home screen, without the need to navi...
Post a Comment
Read more

Financial Literacy Week (FLW) 2025

Reserve Bank of India (RBI) has observed financial literacy week from February 24 to 28, 2025. Financial Literacy and Financial Education Organization for Economic Co-operation & Development (OECD) defines ‘financial literacy’ as a combination of financial awareness, knowledge, skills, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being.  OECD defines ‘financial education’ as the process by which financial consumers / investors improve their understanding of financial products, concepts and risks and through information, instruction and / or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their financial well-being. Financial Literacy Week (FLW) Reserve Bank of India (RBI) has been observing Financial Literacy Week (FLW) every year since 2016 to p...
Post a Comment
Read more

Digital Payments Awareness Week 2025

Reserve Bank of India (RBI) has observed digital payments awareness week from March 10 to 16, 2025. Digital Payments Awareness Week (DPAW) Digital Payments Awareness Week (DPAW) is an initiative to highlight the impact and importance of digital payments and to create awareness about safe usage of digital payment products.  Digital Payments Awareness Week (DPAW) 2025 Reserve Bank of India (RBI) has observed DPAW 2025 from March 10 to 16, 2025.  Under the mission ‘Har Payment Digital’, the theme for the current year is ‘India Pays Digitally’. This theme reflects India’s transformative journey toward a digitally empowered citizenry, with the ubiquity and convenience of digital payments. ‘Har Payment Digital’ mission RBI had launched the mission ‘Har Payment Digital’ on the occasion of the DPAW 2023. This is part of RBI’s endeavour to make every person in India a user of digital payments. Previous Digital Payments Awareness Weeks (DPAWs) Year Theme 202...
Post a Comment
Read more

Exposure Norms for UCBs

Reserve Bank of India (RBI) has issued guidelines on exposure norms and statutory / other restrictions for primary (urban) co-operative banks (UCBs). What is exposure? Exposure shall include both credit exposure (Loans and Advances) and investment exposure (Non- SLR securities). What are the exposure ceiling for individual / group borrowers? Primary (urban) co-operative banks (UCBs) shall fix exposure ceiling in relation to their Tier-I capital. Borrower Exposure ceiling Individual borrower 15% of Tier-I capital Group of connected borrowers / parties 25% of Tier-I capital What is the thresholds for value of loans? The definition of small value loans has been revised as below –  Extant guidelines Revised guidelines (updated on February 24, 2025) UCBs shall have at least 50% of their aggregate loans and advances comprising small value loans i.e., loans of not more than ₹25 lakh or 0.2% of their...
Post a Comment
Read more

Forward Contracts in Government Securities

Reserve Bank of India (RBI) has released directions on forward contracts in government securities. What is Bond Forward? Bond forward means a rupee interest rate derivative contract in which one counterparty (buyer) agrees to buy a specific government security from another counterparty (seller) on a specified future date and at a price determined at the time of the contract. Which transactions shall be covered under the directions? The directions shall apply to forward contracts in government securities (referred to as bond forwards) undertaken in the Over-the-Counter (OTC) market in India. Who are market participants? The following persons shall be eligible to undertake bond forward transactions – A resident A non-resident who is eligible to invest in Government Securities Who are market-makers? Market-maker means an entity which provides prices to users and other market-makers. The following entities shall be eligible to undertake transactions in bond forwards as market-makers – Sche...
Post a Comment
Read more