Gross Domestic Product (GDP) : INDIA

FOR third successive year, the Indian economy has registered a highly impressive growth during fiscal 2005-
06. Sustained manufacturing activity and impressive performance of the services sector with reasonable
support from the recovery in agricultural activity have added greater momentum to this growth process. After
recording some slowdown in the third quarter (October-December) of 2005-06, real gross domestic product
(GDP) registered a sharp increase in the fourth quarter (January-March) of 2005-06 benefiting from a pick-up in
almost all segments of agriculture, industry and services. According to the revised estimates released by the
Central Statistical Organization (CSO) in May 2006, real GDP accelerated from 7.5 per cent in 2004-05 to 8.4
per cent during 2005-06. The Indian economy has, thus, recorded an average growth of over 8 per cent in the
latest three years (2003-04 to 2005-06).

Growth Rates of Real GDP

(Base Year : 1999-2000)

(Per cent)

2000-01 2004-05 2005-06

to 2003- 2004- 2005-
Sector
2002-03 04 05 06 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
(Average
Agriculture -0.2 10.0 0.7 3.9 3.5 -0.2 -1.2 1.5 3.4 4.0 2.9 5.5
Allied Activities (23.5) (22.2) (20.8) (19.9) - - - - - - - -
1.1 Agriculture -0.5 10.7 0.7 - - - - - - - - -
Industry 5.2 6.6 7.4 7.6 6.6 8.0 8.1 6.8 9.5 6.3 7.0 7.9
(19.7) (19.5) (19.5) (19.3) - - - - - - - -
2.1 Mining and Quarrying 4.4 5.3 5.8 0.9 8.2 6.0 5.7 3.7 3.1 -2.6 0.0 3.0
2.2 Manufacturing 5.7 7.1 8.1 9.0 6.6 8.3 9.2 8.1 10.7 8.1 8.3 8.9
2.3 Electricity, Gas and Water 2.8 4.8 4.3 5.3 4.9 7.9 3.1 1.4 7.4 2.6 5.0 6.1
Supply
Services 6.6 8.5 10.2 10.3 10.0 8.2 10.6 11.6 10.1 10.3 9.7 11.0
(56.8) (58.3) (59.7) (60.7) - - - - - - - -
3.1 Trade, Hotels, Restaurants, 8.5 12.0 9.7 11.0 10.2 12.9 10.6 11.5 10.6 11.2 11.7 11.0
Transport, Storage and
Communication
3.2 Financing, Insurance, Real 6.5 4.5 9.2 9.7 8.8 7.5 9.7 10.7 8.8 10.5 8.9 10.5
Estate and Business Services
3.3 Community, Social and 4.1 5.4 9.2 7.8 10.7 4.8 8.5 12.7 7.3 8.0 8.4 7.6
Personal Services
3.4 Construction 5.9 10.9 12.5 12.1 8.9 6.8 20.8 13.5 12.4 12.3 11.5 12.0
Real GDP at Factor Cost 4.6 8.5 7.5 8.4 7.9 6.7 7.0 8.6 8.5 8.4 7.5 9.3
Agriculture
The kharif crops coverage up to July 10, 2006 increased by around 11.9 per cent over a year ago. For all crops
taken together, around 27 per cent of the normal area has been sown so far. Total foodgrains production during
2005-06 was placed at around 208 million tonne, an increase of 5 per cent over the previous year, mainly on
the back of higher output of rice. The increase in the production of non-foodgrains crops was led mainly by
sugarcane and cotton.

Progress of Area under Khariff Crops - 2006-07

(Million Hectares)

Area Coverage (As on July 10)

Crop Normal
Variation 2006
2005 2006
over 2005
Rice 39.9 5.4 6.1 0.7
Coarse Cereals 22.9 6.8 7.3 0.5
Of which
Bajra 9.3 2.4 2.1 -0.3
Jowar 4.6 1.1 1.2 0.1
Maize 6.0 2.7 3.5 0.8
Total Pulses 10.6 2.0 2.7 0.7
Total Kharif Oilseeds 15.1 3.3 3.4 0.1
Of which
Groundnut 5.5 1.2 1.6 0.4
Soyabean 6.3 1.3 1.1 -0.2
Sesamum 1.6 0.3 0.3 0.0
Sunflower 0.5 0.2 0.4 0.2
Sugarcane 4.3 4.3 4.5 0.2
Cotton 8.3 2.5 3.3 0.8
All Crops 101.1 24.3 27.2 2.9
Source: Ministry of Agriculture, Government of India

Agricultural Production
(Million Tonne)
 2003-04 2004-05 2005-06$
Crop
Target Achievement Target Achievement Target Achievement
Rice 87.0 88.5 93.5 83.1 87.8 91.0
Wheat 72.1 72.2 79.5 68.6 75.5 69.5
Coarse Cereals 37.8 37.6 36.8 33.5 36.5 34.7
Pulses 15.2 14.9 15.3 13.1 15.2 13.1
Total Foodgrains 212.1 213.2 225.1 198.4 215.0 208.3
Kharif 112.0 117.0 113.8 103.3 109.9 109.7
Rabi 100.0 96.2 111.3 95.1 105.1 98.6
Total Oilseeds 25.1 25.2 26.2 24.4 26.6 27.7
Kharif 17.0 16.7 16.3 14.2 16.2 16.8
Rabi 8.1 8.5 9.9 10.2 10.4 10.9
Sugarcane 236.2 233.9 270.0 237.1 237.5 278.4
Cotton # 13.8 13.7 15.0 16.4 16.5 19.6
Jute and Mesta ## 11.2 11.2 11.8 10.3 11.3 10.7

$ : Fourth Advance Estimates (July 15,2006)

# : Million bales of 170 kgs each; ## : Million bales of 180 kgs each

Source: Ministry of Agriculture, Government of India

Industry
Industrial production continued to grow at 9.8 per cent during Q1 in 2006-07 The manufacturing sector with
double digit growth (10.9 per cent) continued to be the key driver of industrial activity, contributing almost 92.5
per cent of the growth in industry. Electricity and mining sectors, however, continued to exhibit subdued
growth.

The robust performance of the manufacturing sector was largely led by ‘chemical and chemical products’,
‘machinery and equipments’, ‘basic metal and alloy industries’, ‘transport equipment and parts’, and ‘non-
metallic mineral products’. The manufacturing sector growth at 10.9 per cent during Q1 of 2006-07 was the
highest for this period in the last ten years.

According to the use-based classification, the capital goods sector registered an impressive growth of 21.1 per
cent during Q! of fiscal 2006-07 even on a high base, reflecting strong investment demand. This is the highest
growth for April-May period under the new base (1993-94=100). Higher production of laboratory and scientific
instruments, broad gauge passenger carriage, boilers, complete tractors, industrial machinery and textile
machinery boosted capital goods production. Basic goods sector was buoyed up by growth in cement sector,
carbon steel and other minerals. Intermediate goods sector, after recording subdued growth during most of
2005-06, witnessed moderate improvement, facilitated by higher production of viscose staple fibre, filament
yarn, cotton yarn, paints, enamels and varnishes, and PVC pipes and tubes. Consumer goods, both durable and
non-durable segments, on the other hand, recorded some deceleration, partly on account of base effect.

Infrastructure
The infrastructure sector recorded growth of 5.9 per cent in Q1 of 2006-07 against 7.1 per cent in comparable
period in fiscal 2005-06 on account of deceleration in all industries except petroleum refinery products Double-
digit growth in the petroleum refinery products and moderation in growth of the cement and steel sectors could
be attributed largely to base effect. The decline in crude oil production resulted from fall in production in plants
of ONGC at Mumbai High.

Growth Rate of Manufacturing Groups

(Per Cent)
 Index of Growth Rate Weighted Contribution
Industry
April-May April-May
Group
Weight in
the
2005 2006 (P) 2005 2006
Industrial
Production
Chemicals and chemical products except 14.0 13.3 12.5 25.7 23.4
products of petroleum & coal
Machinery and equipment other than 9.6 11.3 13.4 16.6 18.7
transport equipment
Basic metal and alloy industries 7.5 16.2 21.0 13.1 16.9
Transport equipment and parts 4.0 13.6 21.4 8.4 12.8
Other manufacturing industries 2.6 9.4 31.6 3.0 9.3
Non-metallic mineral products 4.4 7.7 12.2 5.1 7.4
Beverages, tobacco and related products 2.4 10.4 11.4 5.4 5.6
Rubber, plastic, petroleum and coal 5.7 2.5 8.0 1.7 4.8
products
Paper and paper products and printing, 2.7 12.5 12.1 3.9 3.7
publishing and allied activities
Wool, silk and man-made fibre textiles 2.3 -8.4 11.9 -3.0 3.3
Textile products (including wearing 2.5 25.3 9.6 7.8 3.2
apparel)
Cotton textiles 5.5 9.2 2.9 3.9 1.2
Jute and other vegetable fibre textiles 0.6 -3.6 -2.8 -0.1 -0.1
(except cotton)
Metal products and parts (except 2.8 6.7 -4.1 1.7 -0.9
machinery and equipment)
Leather and leather & fur products 1.1 11.4 -12.1 1.2 -1.2
Wood and wood products, furniture & 2.7 -1.3 -21.3 -0.2 -2.4
fixtures
Food products 9.1 7.4 -7.6 5.8 -5.5
Manufacturing – Total 79.4 10.3 10.9 100.0 100.0
Source : Central Statistical Organization.

Services
Services sector with double-digit growth during the past two fiscal (2004-05 & 2005-06) has further
strengthened its place as the leading sector of the Indian economy. Services sector now accounts for more
than 60 per cent of overall GDP. Lead indicators of services sector performance for April-May 2006 suggest
continued buoyancy. Revenue earning freight of the railways continued to record strong growth. Substantial
activity was witnessed in cargo handled by civil aviation and passengers handled at domestic and international
airports. There was a sharp rise in new cell phone connections. Healthy growth in bank deposits and non-food
credit, and, increased business process outsourcing-information technology enabled services exports are
expected to buoy up the sub-sector ‘financing, insurance, real estate and business services’.

Indicators of Service Sector Activity

(Growth rates in per cent)

Sub-sector 2004-05 2005-06 April

2005 2006
Tourist arrivals 23.7 11.7 19.7 $ 20.0 $
Commercial vehicles production 28.6 10.6 -5.3 49.7
Railway revenue earning freight traffic 8.1 10.7 14.9 11.0
New cell phone connections 10.4 89.4 7.6 167.0
Cargo handled at major ports 11.3 10.3 15.8 -2.0
Civil aviation
a) Export cargo handled 12.4 7.3 12.0 10.1
b) Import cargo handled 24.2 15.8 14.6 19.9
c) Passengers handled at international terminals 14.0 12.8 9.9 16.2
d) Passengers handled at domestic terminals 23.6 27.1 19.2 54.0
Roads: Upgradation of Highways 16.1 -23.4 – –
Cement 8.2 10.7 12.6 $ 8.9 $
Steel 7.6 6.0 13.9 $ 7.5 $
Aggregate deposits 11.9 22.3 14.9 @ 20.7 @
Non-food credit 31.6 38.4 31.0 @ 32.9 @
Central Government expenditure 5.6 2.2 -1.0 $ 53.9 $
$
: April-May.
@ : Year-on-year as on July 7.

Business Expectations Surveys

Various business confidence surveys suggest that economic activity is likely to remain buoyant in the near term.
The National Council of Applied Economic Research (NCAER) business confidence index (BCI) increased by 1.7
per cent during April-September 2006 to 154 - the highest level since November 1994. According to the NCAER
survey, overall economic conditions and investment climate increased by 2.5 percentage points and 2.2
percentage points, respectively. The CII’s business confidence index for April-September 2006 increased by 2.1
per cent. The BCI was significantly higher for non-manufacturing firms compared to the manufacturing firms.
The survey revealed that 88 per cent of the respondents planned to increase investments while 75 per cent of
the respondents expected capacity utilization will be up to 100 per cent. The FICCI’s quarterly Business
Confidence Survey conducted during January-March 2006 indicated that the industrial sector was optimistic
about sales, selling price, profits, investments, employment and exports.

Although the BCI registered a marginal fall from the preceding round partly reflecting the base effect - the BCI
had reached an all time high in the previous round - almost 80 per cent of the respondents expected overall
economic conditions to be ‘moderately to substantially better’ in the first half of fiscal 2006-7. The corporates
appear to be comfortably placed in terms of availability and cost of credit. For 89 per cent of the companies,
availability of credit was not a constraining factor, while 78 per cent found cost of credit within their affordable
limits. The services sector continued to be the most upbeat among the three industry sectors covered in the
survey. At the same time, the survey showed that companies are finding rising cost of raw materials as the key
challenge to maintain and improve their growth performance.

According to the Reserve Bank’s latest Industrial Outlook Survey, the Business Expectations Index for Q2 of
2006-07 increased by 5.0 per cent over the previous quarter’s level. The assessment about the overall business
situation for April-June 2006 showed an improvement in the level of confidence over the previous quarter.
Responses to the survey suggest an improvement in expectations for the overall business situation, production,
capacity utilization, order books, employment, exports, imports, selling prices and profit margins during the Q2
quarter July-September 2006-07 vis-à-vis Q1. The financial situation is expected to show an improvement
during JQ2 of financial year 2006-07. While working capital finance requirement is expected to increase, the
availability of finance is also expected to improve .

Business Expectations Surveys

Growth over Growth over

Agency Business Expectations
a year ago previous round
Period Index (per cent) (per cent)
Dun & Bradstreet 2006 (April-June) Business Optimism Index 7.5 5.8
NCAER 2006 (April-September) Business Confidence Index 7.6 1.7
FICCI 2006 (April-September) Business Confidence Index 5.4 -1.4
CII 2006 (April-September) Business Confidence Index .. 2.1
RBI 2006 (July-September) Business Expectation Index 5.8 5.0
Net Response on ‘A Quarter Ahead’ Expectations
About the Industrial Performance

(Per cent)
 Oct-Dec Jan-March Apr-June June-Sept
July-Sept
Parameter Response 2005 2006 2006 2006
2005 (816)
(961) (934) (1086) (1073)
Overall business
Better 45.5 51.3 49.8 46.3 53.1
situation
Financial situation Better 36.7 42.3 40.7 40.4 43.4
Working capital finance
Increase 28.8 32.7 31.9 30.6 32.7
requirement
Availability of finance Improve 30.7 34.1 34.1 33.8 35.0
Production Increase 40.7 46.9 46.3 42.5 49.4
Order books Increase 39.6 43.7 41.0 39.1 45.2
Cost of raw material Decrease -43.6 -30.0 -35.9 -37.3 -45.8
Inventory of raw Below
-4.2 -6.9 -6.8 -5.0 -6.3
material average
Inventory of finished Below
-4.2 -3.3 -4.7 -4.5 -2.6
goods average
Capacity utilization Increase 25.4 31.1 29.6 24.8 32.1
Level of capacity Above
7.6 10.9 11.4 9.4 11.8
utilization normal
Assessment of More than
5.3 5.0 4.9 4.1 3.6
production capacity adequate
Employment in company Increase 7.8 12.7 13.3 14.5 16.4
Exports, if applicable Increase 32.5 33.3 31.8 31.0 38.3
Imports, if any Increase 23.7 19.2 20.8 22.7 23.8
Selling
prices are
Increase 13.3 7.8 10.8 12.4 16.6
expected
to
If increase
expected in Increase at
14.0 16.6 16.3 12.0 10.5
selling lower rate
prices
Profit
Increase 7.1 9.6 12.6 9.3 11.1
margin

Note : 1 Figures in parentheses represent number of companies included in the results.

2 ‘Net response’ is measured as the per cent share differential between the companies reporting
‘optimistic’ (positive) and ‘pessimistic’ (negative) responses; responses indicating status quo (no
change)are not reckoned.Higher ‘net response’ indicates higher level of confidence and vice
versa.
Projections of Real Gross Domestic Product for
India By Various Agencies: 2006-07

Month of
Agency Growth Projections for 2006-07 (per cent)
Projections
Overall Growth Agriculture Industry Services
ADB 7.6 – – – April, 2006
CDE-DSE 7.7 2.4 9.5 9.2 May, 2006
CII Around 8.0 – – – June, 2006
CMIE 7.9 2.5 8.5 9.6 June, 2006
ESCAP 7.9 – – – March, 2006
ICRA 7.4-8.2 2.0 8.2-9.7 9.1-9.7 January, 2006
IMF 7.3 – – – April, 2006
Planning
7.7 3.2 8.9 8.8 December, 2005
Commission*
Reserve Bank of
7.5-8.0 – – – April, 2006
India

– : Not Available.
* : Base year 2001-02, Mid-Year Review of the Tenth Five-Year Plan
ADB : Asian Development Bank;
CDE-DSE : Centre for Development Economics - Delhi School of Economics;
CII : Confederation of Indian Industry;
CMIE : Centre for Monitoring Indian Economy;
ESCAP : Economic and Social Commission for Asia and the Pacific;
ICRA : Investment Information and Credit Rating Agency of India;
IMF : International Monetary Fund.
Country's central banking authorities feel that the buoyancy in manufacturing and services sector activities and
the positive business confidence and expectations suggest that the recent growth momentum in the Indian
economy is likely to be maintained in 2006-07, as has also been projected by different agencies.

SOURCE: Reserve Bank of India Report Macroeconomic and Monetary Developments: First Quarter Review 2006-07

Updated on November 23, 2006

Wilkipedia

This article is about GDP in the context of economics. For other uses, see GDP
(disambiguation).
Nominal GDP per person (capita) in 2006.

IMF 2005 figures of total nominal GDP (top) compared to PPP-adjusted GDP (bottom).

A region's gross domestic product, or GDP, is one of the ways for measuring the size of
its economy. The GDP of a country is defined as the market value of all final goods and
services produced within a country in a given period of time. It is also considered the sum
of value added at every stage of production of all final goods and services produced
within a country in a given period of time. Until the 1980s the term GNP or gross
national product was used in the United States. The two terms GDP and GNP are almost
identical - and yet entirely different; GDP being concerned with the region in which
income is generated and GNP (or GNI - Gross National Income) being a measure of the
accrual of income to a region. The most common approach to measuring and
understanding GDP is the expenditure method:

GDP = consumption + investment + (government spending) + (exports −

imports)

"Gross" means depreciation of capital stock is not included. With depreciation, with net
investment instead of gross investment, it is the net domestic product. Consumption and
investment in this equation are the expenditure on final goods and services. The exports
minus imports part of the equation (often called cumulative exports) then adjusts this by
subtracting the part of this expenditure not produced domestically (the imports), and
adding back in domestic area (the exports).

Economists (since Keynes) have preferred to split the general consumption term into two
parts; private consumption, and public sector (or government) spending. Two advantages
of dividing total consumption this way in theoretical macroeconomics are:

• Private consumption is a central concern of welfare economics. The private

investment and trade portions of the economy are ultimately directed (in
mainstream economic models) to increases in long-term private consumption.
 • If separated from endogenous private consumption, government consumption
can be treated as exogenous, so that different government spending levels can be
considered within a meaningful macroeconomic framework.

Contents
[hide]

• 1 The components of GDP

• 2 Examples of GDP component variables
• 3 The GDP income account
• 4 Measurement
o 4.1 International standards
o 4.2 National measurement
o 4.3 Interest rates
• 5 Cross-border comparison
• 6 GDP and standard of living
• 7 Criticisms and limitations
• 8 Lists of countries by their GDP
• 9 See also
• 10 References
• 11 External links
o 11.1 Global
o 11.2 United States
o 11.3 Data

o 11.4 Articles and books

[edit] The components of GDP

Each of the variables C, I, G and NX (where GDP = C + I + G + NX as above):

(Note: * GDP is sometimes also referred to as Y in reference to a GDP graph)

• C is private consumption in the economy. This includes most personal

expenditures of households such as food, rent, medical expenses and so on but
does not include new housing.
• I is defined as business investments in capital. Examples of investment by a
business include construction of a new mine, purchase of software, or purchase of
machinery and equipment for a factory. Spending by households on new houses is
also included in Investment. Unlike its general meaning, 'Investment' in GDP is
meant very specifically as non-financial product purchases. Buying financial
products is classed as 'saving' , as opposed to investment. The distinction is (in
theory) clear: if money is converted into goods or services, it is investment; but, if
you buy a bond or a share, this transfer payment is excluded from the GDP sum.
 Although such purchases would be called investments in normal speech, from the
total-economy point of view, this is simply swapping of deeds, and not part of the
real economy or the GDP formula.
• G is the sum of government expenditures on final goods and services. It includes
salaries of public servants, purchase of weapons for the military, and any
investment expenditure by a government. It does not include any transfer
payments, such as social security or unemployment benefits.
• X is gross exports. GDP captures the amount a country produces, including goods
and services produced for overseas consumption, therefore exports are added.
• M is gross imports. Imports are subtracted since imported goods will be included
in the terms G, I, or C, and must be deducted to avoid counting foreign supply as
domestic.
• NX are "net exports" in the economy: gross exports − gross imports. There is a
fixed relation: NX = X − M.

It is important to understand the meaning of each variable precisely in order to:

• Read national accounts.

• Understand Keynesian or neo-classical macroeconomics.

[edit] Examples of GDP component variables

Examples of C, I, G, & NX: If you spend money to renovate your hotel so that
occupancy rates increase, that is private investment, but if you buy shares in a consortium
to do the same thing it is saving. The former is included when measuring GDP (in I), the
latter is not. However, when the consortium conducted its own expenditure on
renovation, that expenditure would be included in GDP.

If the hotel is your private home your renovation spending would be measured as
Consumption, but if a government agency is converting the hotel into an office for civil
servants the renovation spending would be measured as part of public sector spending
(G).

If the renovation involves the purchase of a chandelier from abroad, that spending would
also be counted as an increase in imports, so that NX would fall and the total GDP is
unaffected by the purchase. (This highlights the fact that GDP is intended to measure
domestic production rather than total consumption or spending. Spending is really a
convenient means of estimating production.)

If you are paid to manufacture the chandelier to hang in a foreign hotel the situation
would be reversed, and the payment you receive would be counted in NX (positively, as
an export). Again, we see that GDP is attempting to measure production through the
means of expenditure; if the chandelier you produced had been bought domestically it
would have been included in the GDP figures (in C or I) when purchased by a consumer
or a business, but because it was exported it is necessary to 'correct' the amount
consumed domestically to give the amount produced domestically. (As in Gross
Domestic Product.)

[edit] The GDP income account

Another way of measuring GDP is to measure the total income payable in the GDP
income accounts. This should provide the same figure as the expenditure method
described above.

The formula for GDP measured using the income approach, called GDP(I), is:

GDP = Compensation of employees + Gross operating surplus + Gross mixed

income + Taxes less subsidies on production and imports

• Compensation of employees (COE) measures the total remuneration to

employees for work done. It includes wages and salaries, as well as employer
contributions to social security and other such programs.
• Gross operating surplus (GOS) is the surplus due to owners of incorporated
businesses. Often called profits, although only a subset of total costs are
subtracted from gross output to calculate GOS.
• Gross mixed income (GMI) is the same measure as GOS, but for unincorporated
businesses. This often includes most small businesses.

The sum of COE, GOS and GMI is called total factor income, and measures the value of
GDP at factor (basic) prices.The difference between basic prices and final prices (those
used in the expenditure calculation) is the total taxes and subsidies that the Government
has levied or paid on that production. So adding taxes less subsidies on production and
imports converts GDP at factor cost to GDP(I).

Another formula can be written as this:

GDP = R + I + P + SA + W

where R = rents
I = interests
P = profits
SA = statistical adjustments (corporate income taxes, dividends, undistributed corporate
profits)
W = wages

[edit] Measurement
[edit] International standards
The international standard for measuring GDP is contained in the book System of
National Accounts (1993), which was prepared by representatives of the International
Monetary Fund, European Union, Organisation for Economic Co-operation and
Development, United Nations and World Bank. The publication is normally referred to as
SNA93, to distinguish it from the previous edition published in 1968 (called SNA68).

SNA93 sets out a set of rules and procedures for the measurement of national accounts.
The standards are designed to be flexible, to allow for differences in local statistical needs
and conditions.

[edit] National measurement

Within each country GDP is normally measured by a national government statistical

agency, as private sector organisations normally do not have access to the information
required (especially information on expenditure and production by governments).

• Argentina: Instituto Nacional de Estadística y Censos (INDEC)

• Australia: Australian Bureau of Statistics (ABS).
• Austria: Statistik Austria.
• Bangladesh: Bangladesh Bureau of Statistics
• Brazil: Instituto Brasileiro de Geografia e Estatística (IBGE).
• Chile: Instituto Nacional de Estadísticas (INE).
• Colombia: Departamento Administrativo Nacional de Estadistica (DANE).
• Canada: Statistics Canada (StatCan).
• Czech Republic: Český statistický úřad (ČSÚ).
• Estonia: Eesti Statistikaamet
• Finland: Tilastokeskus.
• France: Institut National de la Statistique et des Etudes Economiques (INSEE).
• Germany: Statistisches Bundesamt
• Greece: Εθνική Στατιστική Υπηρεσία Ελλάδος (ΕΣΥΕ).
• Hong Kong:Census and Statistics Department
• Hungary: Hungarian Central Statistical Office
• Iceland: Statistics Iceland.
• Ireland Central Statistics Office
• India: Government of India Ministry of Statistics and Programme
Implementation.
• Indonesia: Badan Pusat Statistik (BPS).
• Italy: Istituto Nazionale di Statistica (ISTAT).
• Japan: Ministry of Economy, Trade and Industry (METI) .
• Jamaica: Statistical Institute of Jamaica (STATIN)
• Korea (South): National Stastical Office, Republic of Korea (NSO).
• Latvia: Centrālā statistikas pārvalde
• Lithuania: Lietuvos Statistikos Departamentas (Department of Statistics,
Lithuania).
• Mexico: Instituto Nacional de Estadística, Geografía e Informática (INEGI).
• Macau: Statistics and Census Service (DSEC).
 • The Netherlands: Centraal Bureau voor de Statistiek (Statistics Netherlands).
• New Zealand: Statistics New Zealand (Statistics New Zealand - Tatauranga
Aotearoa).
• Norway: Statistisk Sentralbyrå
• Pakistan: Federal Bureau of Statistics.
• Philippines Philippine National Statistical Coordination Board
• Poland Central Statistical Office (Główny Urząd Statystyczny; GUS)
• Romania Institutul National de Statistica
• Russia: Federal Service of State Statistics (Rosstat).
• Serbia: Republićki zavod za statistiku
• Slovakia: Štatistický úrad SR.
• Slovenia: Statistični urad Republike Slovenije (SURS).
• South Africa: Statistics South Africa (STATSSA).
• Spain: Instituto Nacional de Estadística (INE).
• Sweden: Statistiska Centralbyrån (SCB).
• Switzerland: Swiss Statistics.
• Turkey: Türkiye İstatistik Kurumu (TUIK).
• United Kingdom: Office for National Statistics (ONS).
• United States: Bureau of Economic Analysis (BEA).
• Vietnam: General Statistics Office (GSO).

GDP can measure spending on all goods and services. GDP can also measure all income
earned.

[edit] Interest rates

Net interest expense is a transfer payment in all sectors except the financial sector. Net
interest expenses in the financial sector is seen as production and value added and is
added to GDP.

[edit] Cross-border comparison

The level of GDP in different countries may be compared by converting their value in
national currency according to either

• current currency exchange rate: GDP calculated by exchange rates prevailing

on international currency markets
• purchasing power parity exchange rate: GDP calculated by purchasing power
parity (PPP) of each currency relative to a selected standard (usually the United
States dollar).

The relative ranking of countries may differ dramatically between the two approaches.

• The current exchange rate method converts the value of goods and services using
global currency exchange rates. This can offer better indications of a country's
 international purchasing power and relative economic strength. For instance, if
10% of GDP is being spent on buying hi-tech foreign arms, the number of
weapons purchased is entirely governed by current exchange rates, since arms are
a traded product bought on the international market (there is no meaningful 'local'
price distinct from the international price for high technology goods).
• The purchasing power parity method accounts for the relative effective domestic
purchasing power of the average producer or consumer within an economy. This
can be a better indicator of the living standards of less-developed countries
because it compensates for the weakness of local currencies in world markets.
(For example, India ranks 13th by GDP but 4th by PPP.)The PPP method of GDP
conversion is most relevant to non-traded goods and services.

There is a clear pattern of the purchasing power parity method decreasing the disparity in
GDP between high and low income (GDP) countries, as compared to the current
exchange rate method. This finding is called the Penn effect.

For more information see measures of national income.

[edit] GDP and standard of living

World GDP per capita changed very little for most of human history before the industrial
revolution. (Note the empty areas mean no data, not very low levels. There are data for
the years 1, 1000, 1500, 1600, 1700, 1820, 1900, and 2003.)

GDP per capita is often used as an indicator of standard of living in an economy. While
this approach has advantages, many criticisms of GDP focus on its use as a sole indicator
of standard of living.

The major advantages to using GDP per capita as an indicator of standard of living are
that it is measured frequently, widely and consistently; frequently in that most countries
provide information on GDP on a quarterly basis (which allows a user to spot trends more
quickly), widely in that some measure of GDP is available for practically every country
in the world (allowing crude comparisons between the standard of living in different
countries), and consistently in that the technical definitions used within GDP are
relatively consistent between countries, and so there can be confidence that the same
thing is being measured in each country.
The major disadvantage of using GDP as an indicator of standard of living is that it is not,
strictly speaking, a measure of standard of living. GDP is intended to be a measure of
particular types of economic activity within a country. Nothing about the definition of
GDP suggests that it is necessarily a measure of standard of living. For instance, in an
extreme example, a country which exported 100 per cent of its production and imported
nothing would still have a high GDP, but a very poor standard of living.

The argument in favour of using GDP is not that it is a good indicator of standard of
living, but rather that (all other things being equal) standard of living tends to increase
when GDP per capita increases. This makes GDP a proxy for standard of living, rather
than a direct measure of it. GDP per capita can also be seen as a proxy of labor
productivity. As the productivity of the workers increases, employers must compete for
them by paying higher wages. Conversely, if productivity is low, then wages must be low
or the businesses will not be able to make a profit.

There are a number of controversies about this use of GDP.

[edit] Criticisms and limitations

Differences between GDP per capita and median household income in selected developed
nations.

GDP is widely used by economists to follow how the economy is moving, as its
variations are relatively quickly identified. However, its value as an indicator for the
standard of living is considered to be limited. An alternative for this purpose is the United
Nations' Human Development Index in which the GDP is a contributing factor in its
calculation. Criticisms of how the GDP is used include:

• One main problem in estimating GDP growth over time is that the purchasing
power of money varies in different proportion for different goods, so when the
GDP figure is deflated over time, GDP grow can vary greatly depending on the
basket of goods used and the relative proportions used to deflate the GDP figure.
For example, in the past 80 years the GDP per capita of the United States if
 measured by purchasing power of potatoes, did not grow significantly. But if it is
measured by the purchasing power of eggs, it grew several times.
• GDP does not take into account the black market, where the money spent isn't
registered, and the non-monetary economy, where no money comes into play at
all, resulting in inaccurate or abnormally low GDP figures. For example, in
countries with major business transactions occurring informally, portions of local
economy are not easily registered. Bartering may be more prominent than the use
of money, even extending to services (I helped you build your house ten years
ago, so now you help me).
• This mainstream economic analysis ignores externalities such as the environment,
subsistence production and domestic work. The current system counts oil spills
and wars as contributors to economic growth, while child-rearing and
housekeeping are deemed valueless. The work of New Zealand economist,
Marilyn Waring, has highlighted that if a concerted attempt to factor in unpaid
work were made, then it would in part, undo the injustices of unpaid (and in some
cases, slave) labour, and also provide the political transparency and accountability
necessary for democracy. Also, when GDP is used as a measure of success over
time, the amount of housework that was done 50 years ago compared to the
present time is much greater. Thus, comparing GDP over time cannot take into
account the changes in society and lifestyle.
• It ignores volunteer, unpaid work. For example, Linux contributes nothing to
GDP, but it was estimated that it would have cost more than a billion US dollars
for a commercial company to develop. Wikipedia, an open-source online
encyclopedia, is another good example.
• Very often different calculations of GDP are confused among each other. For
cross-border comparisons one should especially regard whether it is calculated by
purchasing power parity (PPP) method or current exchange rate method. Using
the latter method to compare living standards is problematic, since it does not
always reflect the real wealth of the citizens, ie. how much they are able purchase
locally in relation to their income (see Penn effect).
• Cross-border comparisons of GDP can be inaccurate as they do not take into
account local differences in the quality of goods, even when adjusted for
purchasing power parity. This type of adjustment to an exchange rate is
controversial because of the difficulties of finding comparable baskets of goods to
compare purchasing power across countries. For instance, people in country A
may consume the same number of locally produced apples as in country B, but
apples in country A are of a more tasty variety. This difference in material well
being will not show up in GDP statistics. This is especially true for goods that are
not traded globally, such as housing.
• GDP counts work that produces no net change or that results from repairing harm.
For example, rebuilding after a natural disaster or war may produce a
considerable amount of economic activity and thus boost GDP, but it would have
been far better if the disaster had never occurred in the first place. The economic
value of health care is another classic example—it may raise GDP if many people
are sick and they are receiving expensive treatment, but it is not a desirable
situation. Alternative economic measures, such as the standard of living or
 discretionary income per capita better measure the human utility of economic
activity. See uneconomic growth.
• Quality of life—human happiness—is determined by many other things than
physical goods and services. Even the alternative economic measures of standard
of living and discretionary income do not take these factors into account.
• Cross border trade within companies distorts the GDP and is done frequently to
escape high taxation. Examples include the German Ebay that evades German tax
by doing business in Switzerland, and American companies that have founded
holdings in Ireland to "buy" their own products for cheap from their continental
factories (without shipping) and selling them for profit via Ireland - thereby
reducing their taxes and increasing Irish GDP.[citation needed]
• People may buy cheap, low-durability goods over and over again, or they may
buy high-durability goods less often. It is possible that the monetary value of the
items sold in the first case is higher than that in the second case, in which case a
higher GDP is simply the result of greater inefficiency and waste. (This is not
always the case; durable goods are often more difficult to produce than flimsy
goods, and consumers have a financial incentive to find the cheapest long-term
option. With goods that are undergoing rapid change, such as in fashion or high
technology, the short lifespan may increase customer satisfaction by allowing
them to have newer products.)
• If a nation does not spend, but saves and invests overseas, its GDP will be
diminished in comparison to one that spends borrowed money; thus accumulated
savings and debt are not taken into account so long as adequate financing
continues.
• GDP does not measure the sustainability of growth. A country may achieve a
temporarily high GDP by over-exploiting natural resources or by misallocating
investment. For example, the large deposits of phosphates gave the people of
Nauru one of the highest per capita incomes on earth, but since 1989 their
standard of living has declined sharply as the supply has run out. Oil-rich states
can sustain high GDPs without industrializing, but this high level would no longer
be sustainable if the oil runs out. Economies experiencing an economic bubble,
such as a housing bubble or stock bubble, or a low private-saving rate tend to
appear to grow faster due to higher consumption, mortgaging their futures for
present growth. Economic growth at the expense of environmental degradation
can end up costing dearly to clean up; GDP does not account for this.
• As a measure of actual sale prices, GDP does not capture the economic surplus
between the price paid and subjective value received, and can therefore
underestimate aggregate utility.
• The annual growth of real GDP is adjusted by using the "GDP deflator", which
tends to underestimate the objective differences in the quality of manufactured
output over time. (The deflator is explicitly based on subjective experience when
measuring such things as the consumer benefit received from computer-power
improvements since the early 1980s). Therefore the GDP figure may
underestimate the degree to which improving technology and quality-level are
increasing the real standard of living.
 • GDP does not take disparity in incomes between the rich and poor into account.
See income inequality metrics for discussion of a variety of complementary
economic measures.
• GDP is often incorrectly used in (often unscientific and unrealistic) comparisons
where net national worth (or national wealth) would be a more correct point of
reference. For example, "person X could buy country Y, because his/her wealth is
more than the GDP of that country". Net national worth is often equal to several
years cumulative GDP [1] [2].

The limits of GDP (or GNP, a slightly different notion) can be summed up in the words of
two critics. Robert Kennedy said[3]:

The gross national product includes air pollution and advertising for cigarettes and ambulances to
clear our highways of carnage. It counts special locks for our doors and jails for the people who
break them. GNP includes the destruction of the redwoods and the death of Lake Superior. It
grows with the production of napalm, and missiles and nuclear warheads... it does not allow for
the health of our families, the quality of their education, or the joy of their play. It is indifferent to
the decency of our factories and the safety of our streets alike. It does not include the beauty of
our poetry or the strength of our marriages, or the intelligence of our public debate or the integrity
of our public officials. It measures everything, in short, except that which makes life worthwhile.

The second critic, Simon Kuznets the inventor of the GDP, in his very first report to the
US Congress in 1934 said[4]:

...the welfare of a nation can scarcely be inferred from a measure of national income. If the GDP
is up, why is America down? Distinctions must be kept in mind between quantity and quality of
growth, between costs and returns, and between the short and long run. Goals for more growth
should specify more growth of what and for what.

Some economists have attempted to create a replacement for GDP called the Genuine
Progress Indicator (GPI), which attempts to address many of the above criticisms. Many
nations calculate a national wealth, a sum of all assets in a nation, but this again does not
account for future obligations such as environmental degradation, asset bubbles, and debt.
Other nations such as Bhutan have advocated gross national happiness as a standard of
living. (Bhutan claims to be the world's happiest nation.)

[edit] Lists of countries by their GDP

• List of countries by GDP (nominal), (per capita)
• List of countries by GDP (PPP), (per capita), (per hour)
• List of countries by GDP demographics comparison
• List of countries by GDP (real) growth rate, (per capita)
• List of countries by GDP sector composition
• List of countries by future GDP estimates (PPP), (per capita), (nominal)
• List of countries by past GDP (PPP), (nominal)