GDP
Once my DAD asked me: “What is GDP beta!! Every day I saw on TV and Paper GDP GDP, What is the GDP?”
Me: I explained to him in Bookies way, even I had very poor Knowledge on that topic so I was not been able to explain in LAYMAN WAY however my DAD is belonging to a Technical Filed so it’s quite natural nothing gets into his mind. I was getting upset and did google almost whole the night and looking for the best answers to make it easily understandable to my DAD as well as to those people who don’t belong to the financial Filed.
As I 1stly found in google & got the definition i.e.” The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis.”
Formula:
GDP= R+I+P+SA+W
Where R : rents, I : interests, P : profits, SA : statistical adjustments, W : wages.
Now, What I told to my DAD was and what is the meaning of the above definitions are:
GDP actually is the amount of money that exchanges in hands.
That's mean- Hum log jo paisa likhit main adan pradan karte hain, use agar jor diya jaiye toh usey GDP kahete hain.
Example: Let see how it happens- A standing tree doesn’t itself contribute GDP. The moment we cut it, GDP increases. The Monitory & Economic transaction involved in the process starting from cutting the tree transforming it into finished goods to selling into Market is the effect on GDP.
Then he asked: So what is GDP Growth actually? And I usually heard, “we have increased our GDP by a certain percentage. And if we invest capital in certain projects, so our GDP will grow” What is that mean?
Me: I replied, ye Jada complex kuch nahi hain, sidhe sidhe bolne se- GDP value is basically compared with previous year/quarter and the positive result shows GDP increase and vise verse.
Example: Increases GDP by 3% means the value of percent GDP has increased by 3% from the previous year/quarter.
Dad asked with full curiosity: Somewhere I read a news, where I found the headings like, USA GDP growth is 1.3% and INDIA is 5.6%, so, it means INDIA is the better performer?
I replied: But A small clarification, that, we should not judge countries by simply comparing GDP growth %. In 2013 India's GDP growth rate was 5.6% whereas the same in America (USA) was 1.3%. But this doesn't mean that America (USA) had poor performance economically.
Value-wise:
INDIA's GDP was 1.86 USD Trillion in 2013,
Whereas America (USA) GDP was 16.8 USD trillion for the same year,
i.e. almost 9 times greater than INDIA.
Finally, DAD understood and makes a conclusion on my initially given EXAMPLE: So that standing tree is equivalent to no GDP. The moment we cut its GDP increases. (And Laugh) (I Was Satisfied when DAD Laughed)
*Above statement is intended for simple understanding, please I am strongly against cutting the tree.
Few examples of increasing of GDP:
If you want to grow GDP pollutes the River. Sarcastically speaking but it will help me in making you better understand how it works.
1stly, If the River is clean, it will have no impact on GDP (like the standing tree) and if we pollute the River, GDP will grow not by once, not even by twice even Thrice and more.
Let see how:
We all know that firstly Industrialization helps in GDP growth.
Secondly, Now waste effluent from the industries flows into the River, in order to clean the River, govt invest thousand of crores & for that increase the GDP.
Thirdly, drinking the polluted water effect our heart & we spend money on doctor fees.
(To sum up, I can say, investment and our expenditure helps in the growth of GDP)
Russia's GDP is very week, therefore their's budget always mentions that there won't be anything duty levied on CIGARETTE /ALCOHOL, which forms to negative way to increase GDP.
Finally Conclude, Hope you Like It.
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