Amit Rajaraman

Lecture 24

The GDP is the output produced within some geographic location. The GNI/GNP (Gross National Income/Product) is the output produced by the citizens of a geographic region. This value must be remitted back to the country. It is the total income earned by permanent residents of the country (nationals).

\[\text{GNP} = \text{GDP} + \text{Factor payments from abroad} - \text{Factor payments to abroad}\]

The Net Domestic Product (NDP) is equal to \(\text{GDP}-\text{Depreciation}\) and the Net National Product (NNP) is equal to \(\text{GNP}-\text{Depreciation}\).
Depreciation is called “consumption of fixed capital”. It is the cost of producing the output of the economy.

In calculating India’s GDP, there are three categories:

  • Category A: The annual figures of commodity-wise output and prices and values of different types of input or input-output proportions are known. We aggregate the commodity-wise price-output multiplications to get the gross value of output and then deduct the total value of input.
    This consists of agriculture, registered manufacturing, construction, forestry and logging, mining and quarrying, and fishing.
  • Category B: The actual figures of all types of factor earnings reported in the annual accounts of difference companies or undertakings are published on a regular basis and known. We aggregate the actual figures of employee compensation, interest, rent, and operating surplus or profits relating to each organization.
    This consists of public administration and defence, railways, water transport, banking and insurance, communication, electricity, air transport, and real estate.
  • Category C: The estimates of working force derived from the decennial population census data and the estimates of average productivity of labour derived from data is shown by periodic sample surveys. We interpolate/extrapolate the decennial data and periodic estimates of average productivity are carried forward/backward by certain indicators. We then derive the year-to-year estimates of workers and their average productivity, and multiply to arrive at the estimate of value added.
    This consists of trade, hotels, and restaurants, unregistered manufacturing, ownership of dwellings, unorganized road and water transport, gas and water supply, storage, and other services.