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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?