What is meant by GDP? Why is it significant?

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What is meant by GDP? Why is it significant?
GDP stands for Gross Domestic Product, which is one of the main indicators of the health of the country's economy. GDP actually means the value of all goods and services produced in the country in a particular year.It is also commonly called economic growth rates. 

GDP data in India is released by Ministry of Statistics and Programme Implementation, which is expressed in comparison with the previous year. The value is measured in percentage and termed as GDP growth rate.

GDP is very important due to the fact the it helps to determine the total value of money generated.

Why is GDP significant?

It is important as it indicates the health of the economy and the present condition. So, a country that has low GDP say for example 1 or 2 per cent is hardly witnessing an economic growth. Countries which show negative GDP growth in successive quarters are said to be in a recession.

A healthy GDP growth reflects on the stock markets. For example Indian stock markets have rallied over the last 10 years, as it's GDP growth has been very healthy. In fact, amongst global peers India and China stand apart.

If the GDP growth rate is high in the country than there will be more employment, increased salary, production and more consumption.

Factors affecting GDP?

These are some of the factors which affect GDP of the country.

* Consumption
* Income
* Investment
* Government
* Net exports
* Amount of resources in the country

Any changes in these factors will lead to increase or decrease in GDP. Also, demographics and population growth play a role in the overall demand-supply dynamics, which affects GDP.

How is it calculated?

GDP is calculated in different ways, such as income approach, production approach and expenditure approach. Commonly used are production approach and expenditure approach.


Read more about: gdp, investment, economy
Story first published: Wednesday, February 13, 2013, 12:59 [IST]
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