Gross domestic product (GDP) Explained | Nitish Rajput - YouTube

Many times you may have heard around you or in newspapers about GDP

Gross Domestic Product. So what is it?

See, Gross means total and domestic means within the political boundaries of India

And products means goods and services which are produced within a year

See you can earn by only two ways

Either you produce something

Like some people are producing cars, bottles, toys, and mobiles

Or you give some services like a doctor, lawyer

These people give services or if anyone provides services by working in a company

Or a coiffure gives services by cutting hairs

The value of all these goods and services

Value means if you have cut the hair in 100 Rs then its value is 100 Rs

Or if you've bought a bottle for 10 Rs then its value is 10 Rs

The value of all these goods and services within a year within a country is called GDP

If a company of USA comes to India to manufacture something

Then it will be counted in the GDP of India.

That will not be counted in the GDP of the USA

That's why we focus so much on make in India campaign

Let's understand this with the help of an example

Assume there is a mall, some shops are selling clothes in that, some are cutting hairs

A tarot card reader is predecting the future, providing the services

Someone is selling utensils.

Goods and services are being sold on every floor

If we note the value of every sold item

And we do it for a year and at last, we add them

So that will be the GDP of that mall for the year

In the same way, how much goods and services are produced in a country

within a year is its GDP. The first thing is why it is needed to calculate the GDP

Why so much effort is needed to calculate this?

If the GDP is going up every year

That means the production is more in the country

The economy of the nation is good. If the GDP is falling every year

That means fewer goods and services are being producing in the nation

When the production is low

Then the selling is also low.

When there is less selling

Then this means the business will earn less money

Earning less money means the purchasing power of people is decreasing

The economy is going down.

We get to know the economic health of our nation by GDP

According to that, the government makes its policies.

When the data of GDP is released we get to know about our shortcomings

And without knowing them we cannot improve them

The GDP of the USA is number one all over the world

USA's GDP is around 22.9 trillion dollars and the second is China with an economy of

18 trillion dollars whereas the economy of India is 2.6 trillion dollars and keeps on changing

Now you may think about how it is calculated?

There is any company that bought a battery from one place and chip from another place

And sold the mobile. So the battery that was bought at its price will be included in the GDP or not.

And if that gets added then the final mobile that would be sold

The price of that mobile will be added to the GDP or not

And if both their prices are added then the price of the battery is added twice to the GDP

So by this, the process of calculating the GDP will be incorrect

I will explain you with the help of an example

Assume I want to eat an omelet

And I buy the eggs from the market

Then its price will have added to the GDP

But if someone from a bakery buys the eggs because he wants to make a cake for selling

Then the price of that egg will not be added.

The price of the final product i.e. cake will be added to the GDP

The same happens with every product. All this information is recorded by Central Statistical Office

Which thing is paid for by the businessman and what are the things that consumers are buying?

The products that are counted in this are the ones that are sold after production

If I make a wooden product at my home and keep it in my home

Then it will not be counted in GDP productions

Along with the goods and services, investment is also counted in the GDP

Investment can be a risky and complicated process

The biggest question is where to invest so that we will earn profit.

Research is required for this.

And deciding this becomes more difficult

when there are very unexpected things just like Corona

During covid, the market suddenly changed. Many companies shut down during this time

And investment became riskier. But during this time too, many companies are

such that sustained themselves and they saw very good growth

Many companies are that stable that there was no effect on them by this

SMALLCASE gives you an option to invest in a portfolio

whose name is "Top 100 Stocks"

In which you will get India's biggest companies, categorized in a basket.

According to the research of SMALLCASE, the chances of the bursting of big

big companies are quite minimal. They help you in increasing the stability of your portfolio.

SMALLCASE gives you all the details about the growth report, past performances,

reviews of these companies.

which helps you in your analysis

In this way, there are different baskets of stocks in SMALLCASE

You can invest according to your choice.

So use this simple platform to invest

The link is provided in the description box

And this is not professional advice so invest with your knowledge

The GDP increases in only two cases. The first is if there is more production of goods and services

And the second case can be maybe the production is not much

but the prices have increased. The first case is called the Real GDP

And the second case where the GDP has increased due to the increased prices

We call that nominal GDP. That's why when the government presents the data of GDP

in front of you then you have to pay attention

if that is real GDP or nominal GDP.

The main purpose of GDP is to tell the production of goods and services of the country.

So that's why the second case where the GDP is increasing due to the price

If we consider that then we don't get to know the actual economy of the country.

To find the solution for that, a base year was taken

Like the GDP in India is calculated by taking the base year as 2011-12.

When you see the data of GDP in the news

Then data is written in two ways

The first is GDP at constant prices

And the second is GDP at current prices.

When GDP at constant prices is written that means 2011 is taken as the base year

GDP at current prices means the base year is the current year

Whenever the product is made in factory

The tax is not included in that time.

The price at that time is called the factor price

And when the tax is added then it is called the market price

Before 2015, the GDP was calculated with factor price

After that, it is being calculated by the market price

There is a house where four people in it and their income is 100 Rs

The income of the second house is 120 Rs and there are 20 people in that

Even though the income of the second house is more but the first house will

managed easily. The GDP of the UK and India is almost the same

But due to IMF and the world bank population, the UK is considered good

The GDP of the UK and India is the same but there is a huge difference in GDP per capita

The per capita of the UK is around 40,000 whereas the per capita of India is 1900

There are many formulas to calculate the GDP. GDP by expenditure

by income

by production.

But you don't have to get into that

That is the work of a financial expert

But when the government presents the data of GDP to you, then you have to pay

attention to some things like nominal GDP, real GDP, GDP at constant price

Or it is GDP at the current price. The GDP is calculated in two ways

The first is annually and the second is quarterly

There are four quarters in a year and the first quarter will be compared with

the first quarter of the previous year.

So that we can compare the production of the rainy season

with the rainy season of the previous year

In 2020, due to corona, the third-quarter rate of the GDP went down to 0.4%

The third quarter will be compared to the same quarter the next year

The GDP rate will rise by little production because it was way too down in corona times

So it's not necessary that the GDP will increase only because the production

GDP rate is calculated in a very simple way

If the GDP was 100 in the third quarter of the previous year

And in the third quarter of the current year, GDP is 105

Then the GDP rate will be 5 %

The GDP has some limitations too. It is very difficult to add the data of informal sectors

Maximum sectors in India are unorganized

The second problem in this is the shell companies

which don't produce the goods and services

They are established just for the purpose of money laundering and saving taxes

which are called shell companies are counted in the GDP

Because the government benefits from adding these companies

They add them and doesn't take any legal action against them

From the report of MCA in 2019, we got to know that 36% of the companies are shell companies

This means they are just showing taxes and doing money laundering

And in actuality, they are not producing any goods or services.

But then also their data is counted in the GDP

So every government does these kinds of tricks to increase the data of their GDP

If GDP increases then unemployment will decrease.

And because the government is not showing the correct GDP data

And this is the reason why India is the first country where the rate of GDP is increasing

And the unemployment rate is also increasing.