Macroeconomics

Analyzing India’s GDP from 2004-2012

Calculating GDP is extremely important has the performance of the economy is fixed by means of this method. The results would help the country to forecast the economic progress, determine the demand and supply, understand the buying power of the people, Analysts keep doing a number of estimations based on country’s GDP. Most of the variables are best remembered and analyzed as % of GDP- investment, savings, market capitalization, exports, imports etc etc.  The growth rates in GDP and its components are one of the most important variables looked upon. So, the question is how do we compute GDP. If you look at the Expenditure approach, it is the classic Keynesian equation:

Y =  C + I + G + (X-M)

Y – Income (or GDP)

C- Consumption Expenditure by Households (or Private Final Consumption Expenditure).

I-Investment Expenditure by firms (or Gross Final Consumption Exp)

G- Government Purchase of goods and services.

X- Exports

M- Imports

If we look at the GDP growth rate from 2004-2012

India's quarterly Gross Domestic Product grew at 4.8 percent in the first quarter of 2013, only slightly better than an upwardly revised 4.7 percent growth in the previous three months. While Services were the largest contributor to growth, Manufacturing rose only 2.6 percent, Electricity, gas and water supply increased 2.8 percent, Agriculture, forestry and fishing were up 1.4 per cent and Mining and quarrying declined 3.1 percent. 

Consumption Expenditure by Households

Household final consumption expenditure is the market value of all goods and services, including durable products (such as cars, washing machines, and home computers), purchased by households. It excludes purchases of dwellings but includes imputed rent for owner-occupied dwellings. It also includes payments and fees to governments to obtain permits and licenses. Household consumption expenditure includes the expenditures of nonprofit institutions serving households, even...