Gross Domestic Product etc - 14

GROSS DOMESTC PRODUCT (GDP) - AN OVERVIEW

2.1 Domestic product is an indicator of overall production activity. The
concept of GDP in the 1993 SNA framework has been briefly discussed in the
following paragraphs.

2.2 There are three equivalent approaches to measure the GDP, namely
the production, income, and expenditure. The production approach GDP
measures the sum of value added of all economic activities within the
country’s territory (sum of output minus intermediate consumption) plus
indirect taxes minus subsidies on products. The expenditure approach GDP
depicts the final use (demand) of the output and comprises (i) Government
Final Consumption Expenditure (GFCE) (ii) Private Final Consumption
Expenditure (PFCE) (iii) Gross Fixed Capital Formation (GFCF), (iv) Change
in Stocks (CIS), and (v) Net Export of Goods & Services. The income (value
added) generated through the production activity is distributed between the
two factors of production, namely, labour and capital, which receive
respectively the salaries and the operating surplus/mixed income of self
employed. Thus the income approach GDP is the sum of compensation of
employees, gross operating surplus and gross mixed income plus taxes net of
subsidies on production. In the National Accounts Statistics of India, the
production approach GDP is considered firmer estimate; and the NAS
presents the discrepancy with the expenditure approach GDP explicitly.
[Reproduced from CSO publication]