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GDP Gross Domestic Product, its formula & Relevance

GDP-Gross Domestic Product

Dear Readers, at the commencement of this article I am are very happy to share with you the full form of GDP and formula for calculating Gross Domestic Product of a country

And additionally a insights into the key takeaways, measurements and a touch of Indian GDP-Gross Domestic Product construct

What is the full form of GDP ?

So what does GDP stands for?

GDP – “Gross Domestic Product” and represents the entire price of all the finished product and services created inside a country during a specific time period measure (typically one year)

As a broad indication of overall domestic production, it functions as a comprehensive card of the country’s economic health


Let’s think of Economy like a giant Super Market with millions of goods starting from grocery items to electronics to large home appliances.

And every time a finished product or services is sold will bring up a price and at the end of the year will bring up the total,THAT’s the Gross Domestic Product (GDP) of that super market !!

Key Takeaways

So, basically it provides an financial synopsis in nursing monetary summary of a country, which is used to estimate the dimensions of associate in nursing economy and its rate of growth

Though it would have limitations, it’s a really vital and necessary tool to guide policymakers, investors, and company business homes in strategic higher cognitive process

It may be calculated in 3 ways, victimization expenditures, production, or incomes. It may be adjusted for inflation and population to supply deeper insights

Basics of GDP – Gross Domestic Product

GDP comprises all of the Private and Public consumption, Government outlays, Investments, additions to private inventories, paid-in construction costs, and the Foreign balance of trade

Foreign Balance of trade is – (exports are added, imports are subtracted)

Formula to Calculate

GDP = C + G + I + NX

i.e (Consumption + Government spending + Investment + NX) (NX is exports – imports)

India – GDP (Gross Domestic Product) Composition Breakdown

Here is the dipiction of India’s Gross Domestic Product Composition Breakdown

GDP-Gross Domestic Product Composition of India
Source: Mecometer

What are the different types of measurements:

Nominal GDP

Is the measurement of the raw data.

Real GDP

It is derived on more inclusive and larger parameters , where it takes into account the impact of inflation and allows comparisons of economic output from one year to the next and other comparisons over a period of time

GDP growth rate

It is the increase in GDP from one quarter to another quarter

GDP per capita

It measures GDP per person in the countrywide population; it is a useful way to compare GDP data between various countries

Balance of Trade

Balance of Trade is one of the key components of a country’s (Gross Domestic Product) formula.

It increases when the total value of goods and services that domestic producers sell to foreigners exceeds the total value of foreign goods and services that domestic consumers buy, otherwise known as a trade surplus

And if domestic consumers spend more on foreign products than domestic producers sell to foreign consumers — a trade deficit—then GDP decreases

So to balance or keep the trade deficit in control – a lot of thrust on Make in India Initiatives and policies from the Government

Brief about GDP – Gross Domestic Product !!


The first fundamental concept of GDP was invented at the end of the 18th century.

And the modern concept was developed in 1934 by the American economist Simon Kuznets and adopted as the main measure of a country’s economy at the Bretton Woods conference in 1944


GDP is the most commonly used measure of economic activity.

Though the GDO is usually calculated on an annual (yearly) basis, it can also be premeditated on a quarterly basis

In the United States, for example, the government releases an annualized Gross Domestic Product (G D P) estimate for each quarter and also for an entire year.

Most of the individual data sets will also be given in real terms, meaning that the data is adjusted for price changes, and is, therefore, net of inflation

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