What GDP measures, and how India counts it

Gross domestic product (GDP) is the market value of all the final goods and services produced within a country over a period — a quarter or a year. “Final” matters: the steel that goes into a car is counted once, inside the price of the car, not twice. “Within a country” matters too: what a foreign-owned factory makes in India is part of India’s GDP.

Three ways to add it up

• Production: add up the value each industry adds — the price of what it sells minus what it bought from other industries. This is gross value added (GVA).
• Spending: add up what households consume, what governments spend on goods and services, what is invested in buildings, machines and stocks, and exports minus imports.
• Income: add up wages, profits, rents and interest earned in producing it all.

In theory the three give the same answer; in practice the differences show up as “discrepancies” in the tables. To go from GVA to GDP, statisticians add taxes on products and subtract subsidies on them.

Nominal and real

GDP at current prices (nominal GDP) rises when more is produced and also when prices go up. To see how much more the economy is actually producing, statisticians value everything at the prices of a chosen base year: GDP at constant prices, or real GDP. When people talk about the growth rate, they almost always mean the growth of real GDP compared with the same period a year earlier. The base year is updated from time to time, which also brings in newer sources of data.

Who counts, and when

In India the figures come from the National Statistics Office (NSO) of the Ministry of Statistics and Programme Implementation. The financial year runs from April to March. Estimates for each quarter come out about two months after it ends — at the end of February, May, August and November. A first advance estimate for the whole year is published in early January, before the year is over, so that it can be used for the Union Budget; a provisional estimate follows at the end of May, and the figures are revised again in later years as fuller data arrive. A big revision is normal, not a scandal.

What GDP does not tell you

• How the income is shared: an average can rise while most people’s incomes do not.
• Work that is not paid for, such as cooking and caring at home.
• Damage to the environment, or the running down of natural resources.
• How people feel about their lives.

Dividing GDP by the population gives GDP per person, a rough guide to average living standards. To compare countries, economists often adjust for the different prices of the same things in each country (purchasing power parity). Our data hub and the country pages chart GDP for every country from the World Bank’s figures.