GROSS DOMESTIC PRODUCT

PRESENTED BY: RAJAT KAMAL (31) RAJEEV RANJAN (32) RAKESH RANJAN (33) RANJEET SHAH (34) RASIKA SALODKAR (35)

WHAT IS GDP?

THE GDP IS DEFINED AS THE MARKET VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED WITHIN A COUNTRY IN A GIVEN PERIOD OF TIME.

IT IS ONE OF THE MEASURE OF THE SIZE OF THE ECONOMY.IT IS AN INDICATOR OF ECONOMIC HEALTH OF ANY COUNTRY.IT CAN MEASURE SPENDING ON ALL GOODS AND SERVICES OR IT CAN ALSO MEASURE ALL INCOME EARNED .

MEASUREMENT :

GDP IS MEASURED BY NATIONAL STATISTICAL AGENCY.SUCH AS:

INDIA- MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION

RUSSIA- FEDERAL SERVICE OF STATE STATISTICS

BRAZIL- INSTITUTO BRASILEIRO DE GEOGRAESTATISTICAIA

UNITED STATES- BUREAU OF ECONOMIC ANALYSIS

TYPES OF MEASUREMENT

EXPENDITURE METHOD: GDP= CONSUMPTION+ INVESTMENT+ GOVT.

SPENDIND+ (EXPORT-IMPORT)

INCOME METHOD : GDP= COMPENSATION OF EMPLOYEES +

GROSS OPERATING SURPLUS+ GROSS MIXED INCOME+ TAX LESS SUBSIDIES ON PRODUCTION AND IMPORTS

OR GDP= RENT+

INTEREST+PROFIT+STRATICAL ADJUSTMENT+ WAGES

COMPONENTS OF GDP

PRIVATE CONSUMPTION: HOUSEHOLD EXP. SUCH AS FOOD, RENT,MEDICAL EXP. ETC

INVESTMENT: CAPITAL EXPENDITURE

GOVT SPENDING

CUMULATIVE EXPORT

CONTD…….

CONTD…….

COMPENSATION OF ENPLOYEEGROSS OPERATING SURPLUSMIXED INCOMERENTINTRESTPROFITSTATISTICAL ADJUT(CORPORATE INCOME TAXES,DIVIDENDS,UNDISTRIBUTED CORPORATE PROFIT)WAGES

CROSS-BORDER COMPARISION

GDP OF DIFFERENT COUNTRIES CAN BE COMPARED BY FOLLOWING METHODS:

CURRENT CURRENCY EXCHANGE RATE

PURCHASING POWER PARITY RATE

GDP PER CAPITA

CONTD… CURRENT EXCHANGE RATE

METHOD CONVERTS THE VALUE OF GOODS AND SERVICES USING GLOBAL CURRENCY EXCHANGE RATE.

PPP- RELATIVE EFFECTIVE DOMESTIC PURCHASING POWER OF THE AVERAGE PRODUSER OR CONSUMER WITHIN AN ECONOMY.

GDP PER CAPITA IS GDP DIVIDED BY THE AVERAGE POPULATION FOR THE SAME YEAR.

DISADVANTAGES OF PARAMETERS

EXCHANGE RATE

FLUCTUATION IN CURRENCY EXCHANGE RATE

PPP

DOES NOT REFLECT THE VALUE OF ECONOMIC OUTPUT IN INTERNATIONAL TRADE

IT REQUIRES MORE ESTIMATION THAN GDP PER CAPITA

RANK BASED ON GDP PER CAPITARANK COUNTRY GDP per capita ($ U.S)

1. LUXEMBOURG 69,800

2. NORWAY 42,364

3. U.S.A 41,399

7. CANADA 34,737

9. CHINA & HONG KONG 33,411

16. JAPAN 30,615

17. GERMENY 30,579

18. UNITED KINGDOM 30,470

20. FRANCE 29,316

22. SINGAPORE 28,100

33. SOUTH KOREA 20,590

62. RUSSIA 11,041

68. BRAZIL 8,584

122. INDIA 3,344

RANK BASED ON PPP

RANK COUNTRY PPP in million of U.S $

1. UNITED STATES 12,277,583

2. CHINA 9,412,361

3. JAPAN 3,910,728

4. INDIA 3,633,441

5. GERMENY 2,521,699

6. UNITED KINGDOM 1,832,792

7. FRANCE 1,830,110

8. ITALY 1,668,151

9. BRAZIL 1,576,728

10. RUSSIA 1,575,561

GDP & STANDARD OF LIVING

GDP PER CAPITA IS USED AS AN INDICATOR OF STANDARD OF LIVING IN AN ECONOMY

ADVANTAGES IT IS MEASURED FREQUENTLY,

WIDELY & CONSISTENTLY INFORMATION ON GDP IS

AVAILABLE ON A QUARTERLY BASIS

DISADVANTAGES

DEFINITION OF GDP DOES NOT SUGGESTS.

MAKES GDP A PROXY FOR STANDARD OF LIVING.

DOES NOT TAKE INTO ACCOUNT THE BLACK MARKET.

IGNORES VOLUNTEER, UNPAID WORK. EXAMPLE : LINUX

QUALITY OF LIFE IS DETERMINED BY MANY OTHER THINGS THAN PHYSICAL GOODS & SERVICES.

HOW TO ACHIVE 10%GDP GROWTH

1. SPECIAL ECONOMIC ZONES FOR EDUCATION(SEZFE)

2. EMPOWERING RURAL INDIA

3. HEALTH CARE CITIES

4. RURAL MALLAS

5. INDUS ECONOMIC FREE TRADE ZONE(IEFTZ)

AN ANALYSIS OF INDIA’S GROSS

DOMESTIC PRODUT1. (1980-81 TO 1990-91)

2. (1991-92)

3. (1993-94 TO 1998-99)

4. (1999-2000)

5. (2000-01 TO 2004-05)

CHANGING COMPOSITION OF GDP

FORECAST TO FUTURE FROM THE US AND OTHER COUNTRY

FLUCTUATION IN GDP

1. Innovation: Technological Advancement

2. Political Events

3. Weather

4. War

5. Monetary policies

6. Government policies

7. International factors

…continued

8. Cumulative export.

9. Black markets.

10. Informal business practices.

…continued11. Aggregate Demand

C=Consumption

I=Investment

G=Gov’t Spending

Consumer Confidence, Interest Rate, Disposable Income, Stock Market, Expectations

Interest Rate, GDP, Industry Conditions, Expectations

Requirements of political supporters and budgetary constraints influence fiscal policy decisions on both G and T (taxes)

PROJECTED US$ GDP PER CAPITA GROWTH

Brazil China India Russia France Germany Italy Japan UK US2000-05 9.8 9.2 3.7 7.0 2.2 1.4 2.7 1.1 3.0 2.62005-10 6.3 11.2 7.5 10.3 1.5 2.0 1.6 0.9 1.9

1.72010-15 6.4 9.2 7.4 8.1 1.5 1.6 1.7 1.2 1.9 1.32015-20 6.2 7.8 7.2 7.5 1.6 1.3 1.7 1.8 1.6 1.32020-25 4.6 7.3 7.4 6.1 1.6 0.9 1.2 1.8 1.2 1.42025-30 4.7 6.9 8.2 6.2 1.6 0.9 0.9 1.5 1.3 1.72030-35 5.2 6.5 8.9 5.2 1.6 1.7 0.8 1.0 1.7 1.92035-40 5.3 6.3 8.9 4.3 1.9 2.0 1.3 1.2 2.0 2.02040-45 5.0 5.9 8.3 3.6 1.9 1.9 1.8 1.6 1.8 1.92045-50 4.9 5.4 7.6 3.4 2.0 1.8 2.1 2.0 1.7 1.9 ProjectedUS$GDP Per Capita Growth: 5-Year Averages Average %yoy BRICs VS G6`

BRICs ECONOMIC TREND

LARGER FORCE IN THE WORLD ECONOMY.

GROWTH IN PER CAPITA INCOME & CURRENCY MOVEMENTS.

LARGER THAN THE G6 IN US DOLLAR.

KEY CHALLENGES IS DEVELOPMENT ON TRACK.

DUE TO SLOW DOWN IN ECONOMIC GROWTH IN DEVELOPED COUNTRY.

INVESTMENT PORTFOLIOS INCREASED.

BRIC ARE EMERGING MARKET.

DRAMATICALLY DIFFFERENT WORLD

ECONOMIC SIZE

ECONOMIC GROWTH

INCOMES AND DEMOGRAPHICS

GLOBAL DEMAND PATTERNS

CURRENCY MOVEMENTS

BY 2025 BRICs ECONOMIES OVER HALF AS LARGE AS THE G6

BY 2040 OVERTAKE THE G6

THE CONDITION FOR GROWTH

MACRO STABILITY

INSTITUTIONS

OPENNESS

EDUCATION

GROWTH IN EMPLOYMENT

GROWTH IN THE CAPITAL STOCK

TECHICAL PROGRESS(OR TOTAL FACTOR PRODUCTIVITY GROWTH)

BRICs REAL GDP GROWTH

% Brazil China India Russia 2000-2005 2.7 8.0 5 .3 5.9 2005-2010 4.2 7.2 6.1 4.8 2010-2015 4.1 5.9 5.9 3.8 2015-2020 3.8 5.0 5.7 3.4 2020-2025 3.7 4.6 5.7 3.4 2025-2030 3.8 4.1 5.9 3.5 2030-2035 3.9 3.9 6.1 3.1 2035-2040 3.8 3.9 6.0 2.6 2040-2045 3.6 3.5 5.6 2.2 2045-2050 3.4 2.9 5.2 1.9 GSBRICs Model Projections. . BRICsReal GDP Growth: 5-Year Period Averages

GOLDMAN SACHS VS LEVINE RENELT MODEL

30 year averageReal GDP Growth GOLDMAN SACHS LEVINE-RENALT MODELBrazil 3.7 3.3Russia 3.9 3.5India 5.8 5.3China 5.6 5.8Comparing Our Projections With the Levine-Renelt Model

CHALLENGES FOR BRICs

MUCH LESS OPEN TO TRADE

INVESTMENT AND SAVING ARE LOWER

PUBLIC AND FOREIGN DEDT ARE MUCH HIGHER

POPER GOVT POLICY

WRAPPING UP

IT MEASURE ECONOMIC HEALTHBRICs WILL OVERTAKE G6DETERMINES THE STANDARD OF LIVINGUNDERSTANDING THE GLOBAL DEMAND PATTERNIT HELPS TO BE CYNOSORE IN THE GLOBAL ECONOMIC

WAIT……………

WILL INDIA BECOME SUPERPOWER LIKE USA?