Thread by @Starboy2079

GDP (Explained)

What is :
GDP Real
GDP nominal
GDP per capita
GDP PPP
GNI
GNP

If u r from non economics background and u read abt these terms every day but u dont know their meaning and significance then read this thread
I will explain in laymen language

1/16

Lets start

Just go 10000 years ago n imagine a jungle two family lives there

Ur family
Ur neighbor family

Ur family have 10 members
Ur neighbor family have 2 members

U both daily go to Jungle, search apples, n bring apples n eat that apples.
Thats ur life

U get 10 apples daily
Ur neighbor get 4 apples daily

So Ur daily GDP = 10 apple
Neighbor GDP = 4 apple

That's the GDP, Ur total work efforts n consumption

So Ur GDP is way bigger than ur neighbor's GDP but don't forget u have 10 members n ur neighbor have only 2 members

So in ur family -
every one gets - 1 apple (10/10)
but in ur neighbor family, every one gets = 2 apples (4/2)

So GDP Per capita
Ur = 1
Ur neighbor = 2

So here interpretation change completely. It seems ur neighbor is more happy than u

But here is the twist

Suppose ur family members r thin n have less appetite n even half apple is sufficient and one apple daily is more than sufficient

Ur neighbor r fat, they have huge appetite n every member need atleast 4 apples in a day but they r getting only two

Now who is more happy ?

Ur neighbor getting only 0.5 of what they need (2 apple in place of 4)

U r getting double of what u need (1 apple in place of 0.5)

This is GDP PPP
So in GDP PPP u r 2/0.5 = 4 times bigger than ur neighbor

Congratulations U just learnt GDP, GDP per capita and GDP PPP

GDP is total market value of finished good n service in a country
India's GDP = 3.7 lac cr dollar

That means in a year we made goods n service worth of $ 3.7 lac crore

So if a tea seller sold tea of Rs 50000 in a year then his contribution in nation's GDP is Rs 50K (roughly)

A Barbour performs hair cutting of Rs 1 lac in a year then his contribution is Rs 1 lac

If ur company sells finished goods (manufactured in India) of Rs 100 cr n then contribution of ur company is Rs 100 cr (roughly)

So GDP tells abt work output of country

GDP increasing means work output of country in increasing.

India GDP fell in 2020-21 coz there was lockdown n people cud not work. People r doing more work mean income is increasing n country is growing. GDP per capita is abt individual output

There may be some people doing more work n some doing nothing

India is at 5th rank in GDP but 144th at GDP per capita.

Suppose someone pay Rs 10000 to dig a farm. If someone has JCB, he alone will dig n get Rs 10000 while 100 labor will dig manually n get Rs 100 each

So as ur technological advancement will increase ur GDP per capita will also increase

Ur population is ur strength also n will be utilized with time as economy will grow

But GDP n GDP Per capita both r incomplete coz they don't include cost of living
N here comes GDP PPP

India's GDP per capita is $2500
UK's GDP per capita is $ 47,000

but cost of living differs in India n UK In India u can fulfill ur basic needs at $ 2500 (Rs 2 lac) but UK is very costly u cant fulfill their at $47000

Suppose USA GDP is $5 India
GDP is $1

but in India cost of one burger is 0.5$ and in USA cost of same McD burger is $7 then which country is better in GDP ?

n here comes the GDP PPP

GDP PPP take care cost of purchasing power of money in that country

In GDP PPP
India is at 3rd rank

GDP = total value of finished good n service in a country in a year or quarter (subtract import)
GDP Per capita = individual share in GDP
GDP nominal = don't count inflation
Real GDP = count inflation factor also, a base year is selected

GDP PPP = count purchasing power of money in that country like cost of food items, rent, land, cloths etc

GNP = difference between GDP n GNP is GDP counts country output and GNP counts output of natives so in GNP, output of a foreigner working in India wont be counted

but output of an Indian working abroad will be counted

GNI = same as GNP, GNP talks about production, GNI talks about income

GDP is gross domestic product
GNP is gros national product

16/16