What is Gross Domestic Product (GDP)?
Gross Domestic Product is defined as the total market value of all final goods and services produced in a year in a domestic territory of a country.
The word “domestic” in Gross Domestic Product pertains to the fact that only the goods and services produced within a country are counted in the GDP.For example – an Indian company – Haldiram produces potato chips and USA company PespiCo also produces potato chips in India. Since both these companies produce Chips within India – their product will be considered for calculation of GDP of India. Similarly – Tata motors producing Car in Gujarat is counted in India’s GDP. But, Tata motors producing Car in UK is not counted in India’s GDP
Two things must be noted
- GDP is a monetary measure, there is no other way of adding up the different sorts of goods and services produced in a year except in terms of money prices.
- For calculating GDP accurately all the goods and service must be counted once, hence to avoid counting several times, GDP includes only final goods and avoid transactions involving intermediate goods.
Goods and Services produced during a certain period (usually an year) is counted. In India, GDP is computed quarterly and yearly.
Here, Domestic Territory = Geographical territory + 200 nautical miles +India’s Embassy in foreign + India’s military stations – Foreign Embassy in India