GDP - Definition, Types and Importance.
                     GDP: DEFINITION, 
TYPES, AND 
IMPORTANCE
What Is Gross Domestic 
Product (GDP)?
 Gross domestic product (GDP) is the 
total monetary or market value of al l  
the fi nished goods and services 
produced within a country's borders 
in a specifi c time period. 
 As a broad measure of overall  
domestic production, it functions as a 
comprehensive scorecard of a given 
country’s economic health.
Source: groww.in
Types of GDP 
Measurements
 Real GDP
 Nominal GDP
 GDP per capita
 GDP growth rate
Source: groww.in
Real GDP
 Real GDP is the gross domestic 
product and measured with respect to 
a base year. It is adjusted to infl ation 
and hence is also known as infl ation-
corrected GDP or current price.
 For example, since 2015, the current 
base year for determination of India’s 
real GDP is 2011-12. Earl ier, it was 
2004-05.
Source: groww.in
Nominal GDP
 Nominal GDP is measured based on 
prevail ing current market prices, 
without considering the eff ects of 
infl ation or defl ation. It depicts the 
monetary value of goods and services 
produced in a country in one fi nancial 
year.
Source: groww.in
GDP per capita
 GDP per capita is gross domestic 
product per person. It is the ratio 
between a country’s real GDP to its 
population.
 For instance, as per the International 
Monetary Fund (IMF), the current 
nominal per capita GDP of India as of 
October 2019 is $2,172.
Source: groww.in
GDP growth rate
 GDP growth rate, as the name suggests,  is  
an increase in the gross domest ic product 
of  a country per quarter.
 For instance,  the current Indian GDP 
growth rate of India during the 2nd quarter 
( Ju ly to September) of  FY 2019-20 was 
4.5%. Dur ing FY2020-21, the World Bank 
predicts India’s  GDP growth rate to be 5%.
 As per the National  Stat ist ica l  Offi ce (NSO),  
the 5% growth rate of India is  the s lowest 
in last  11 years. .
Source: groww.in
Types of Gross 
Domestic Product (GDP) 
Calculations
 The Expenditure Approach
 The Production (Output) Approach
 The Income Approach
Source: groww.in
Importance of GDP
 Gross Domest ic Product is  the most popular  
measure used by individuals a l l  over the 
wor ld to determine the s ize and product ion 
capacity of  an economy. I t  a lso refl ects the 
growth potent ia l  of  a  country,  as i t  considers 
the total  amount of  resources avai lable in  a  
country.
 GDP growth rate is  a  major  indicator of  the 
development rate of  an economy and is  one 
of  the major  parameters considered whi le  
analys ing the overal l  health and performance 
of  the country.
Source: groww.in
The Bottom Line
 In recent decades, governments have 
created various nuanced 
modifi cations in attempts to increase 
GDP accuracy and specifi city. Means 
of calculating GDP have also evolved 
continually since its conception to 
keep up with evolving measurements 
of industry activity and the 
generation and consumption of new, 
emerging forms of intangible assets.
Source: investopedia.com
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