Wish you a happy new year!
Gross Domestic Product etc
An understanding of the concept of GDP,
National Income, Per capita income etc are essential to the marketing of life
insurance. To cite examples (i) do you know that you can relate rate of growth
of gdp to variations in stock prices and nav of units in Ulip (ii) do you know
how life insurance figures are incorporated into gdp statistics?. I do not go
into the details here. However I can say that the knowledge of many life
insurance men about gdp etc is very poor. To be of assistance to the readers to
come out of the bliss of ignorance I am giving below basic concepts. I am
reproducing from the Central Statistical Organisation’s National Accounts Statistics: Manual on Estimation of State and District Income 2008' - Basic Concepts
of National Accounts Aggregates’.
Introduction
1.1 The basic concepts and definitions of
the terms used in national accounts largely follow those given in the System of
National Accounts (SNA) of the United Nations, World Bank, International Monetary
Fund (IMF), Organisation for the Economic Coooperation and Development (OECD)
and the European Union. The following paragraphs describe the major concepts
used in National Accounts Statistics and the inter relationship particularly of
those relating to national product, consumption, saving and capital formation.
National Product
1.2 National product by definition is a
measure in monetary terms of the volume of all goods and services produced by
an economy during a given period of time, accounted without duplication. The
measure has to be in value terms as the different units of production and
different measures of services are not directly additive. In the case of a
closed economy the measure amounts to domestic product. An important
characteristic of this measure is its comprehensiveness. The measure covers all
the goods and services produced by the residents of a country. Thus the goods
cover all possible items produced, as for example, agricultural crops,
livestock and livestock products, fish, forest products, mineral products,
manufacturing of various consumer items for consumption, machinery, transport
equipments, defence equipments etc., construction of buildings, roads, dams,
bridges etc. The services similarly cover a wide spectrum including medical and
educational services, defence services, financial services, transport services,
trading services, domestic services, sanitary services, government services,
etc.
1.3 All goods produced during the period
have to be included whether they are marketed i.e., exchanged for money or
bartered or produced for own use. For example, some of the products of
agriculture, forestry and fishing are used for own consumption of producers and
therefore an imputed value of these products are also to be included.
Similarly, all services produced are required to be included, excepting those
for own final consumption. However, exception to this rule of services output,
are rental of buildings which are owned and occupied by the owners themselves
and service produced by paid domestic servants. Own account construction
activities are also similarly to be included.
1.4 Another important feature of the
measure is that it is an unduplicated value of output or in other words only
the value added at each stage of processing is taken into account while
measuring the total, i.e., in the measurement of national output a distinction
is made between "final" and "intermediate" products and
unduplicated total is one that is confined to the value of the final products
and excludes all intermediate products. To use a simple example, if the
production process during a year involves the production of wheat, its milling
into flour and the baking of bread which is sold to consumers then the value of
national output should equal the final value of the bread and should not count
the separate value of the wheat and flour which have been used up in the course
of producing bread. Thus the national product is not the total value of goods
and services produced but only the value of the final product excluding the
value of inputs of raw materials and services used in the process of
production.
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