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Indian Economy / Macroeconomic Aggregates

Growth Indicators of Indian Economy


    The first person to prepare National Income estimates was Dadabhai Naoroji in 1868. Professor V.K.R.V.Rao in 1940 prepared second estimates in his work, "The National Income of British India", which is more refined and which included agriculture. This was based on individual access to different data available.

    • In 1949, the Union cabinet constituted a committee to develop National Income ( NI ) estimates. The committee consisted of P.C. Mahalanobis ( founder of ISI, Kolkatta ), Prof. D.R. Gadgil and Prof. V.K.R.V. Rao.
    • The committee gave a preliminary report in 1951 and gave the final report in 1954. It became primary source for preparing NI estimates. It recommended for institutional set up for NI estimates. Accordingly CSO ( Central Statistics Office ) and NSSO ( National Sample Survey Office ) were established. NSSO conducts survey to bridge the gap in the preparation of NI estimates and it collects the socio-economic data.
    • CSO has taken 1950-51 as base year for the series of NI estimates and then subsequently 1960-61, 1970-71, 1980-81, 1993-94, 1999-2000, 2004-05 and 2011-12.
    • Gross Domestic Product ( GDP ) -
      The basic concept in preparing the GDP is value addition which is also known as Income Generation.
      Value Added = Value of the output - Value of the inputs.
      GDP is the aggregate of gross value added from all the final goods and services produced by residents and institutions within the geographical boundaries of a country.
    • Gross National Product ( GNP ) –
      GNP = GDP + Net Value Added / income from abroad ( It is value added by Nationals only ). Income from abroad includes net remittances and trade surplus ( or deficit ).
    • Net Domestic Product ( NDP ) -
      NDP = GDP – Depreciation or Consumption of Fixed Capital ( CFC ) – Financial Intermediate Services Indirectly Measured ( FISIM ) ( which was added later by CSO ).
      Example of FISIM – When we have taken loan, the interest that is paid, comes under FISIM.
    • Net National Product ( NNP ) -
      NNP = GNP – CFC – FISIM
      It is also called the National Income. It is used in calculation of per capita income.
    • GDP at Factor Cost - If we take factors of production for calculating GDP, it will be called GDP at Factor Cost. The factors of production are Rent for the Land, Interest for Capital, Wages of Labour and Profit / Loss for Organization.
    • GDP at Market Price = GDP at Factor Cost + Indirect Taxes – The Subsidies
    • GDP at Purchasing Power Parity ( PPP ) - At Purchasing Power Parity, a US $ will have the same purchasing power in the US economy as well as in the domestic economy. GDP at PPP is equivalent to GDP/ Purchasing Power of $. India is third largest economy in terms of PPP. For calculating PPP, basket of goods is taken into consideration.
    • GDP at Constant Prices - It is the GDP calculated at the Prices prevailing during the base year ( 2011-12 ). It is also called the Real GDP.
    • GDP at Current Prices - It is the GDP calculated at the Prices prevailing during the current year. It is also called the Nominal GDP. Growth rate is always measured in real term and not in the nominal term.
    • GDP at factor cost and constant prices facilitates to study the economic growth in real term.
    • GDP at market prices and current prices facilitates to work out the savings rate and investment rate ( capital formation ).
    • GDP at PPP and current prices facilitates for comparison at the International level.
    • NNP at factor cost and constant prices is the NI at constant prices which facilitates to work out the Per Capita Income at constant prices.
    • NNP at factor cost and current prices is the NI at current prices which facilitates to work out the Per Capita Income at current prices.