GDP..

Real Indicator & ADVANCE ESTIMATE

OBJECTIVE
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The advance GDP estimates are released before the end of a financial year to enable the government to formulate various estimates for inclusion in the Budget.

From Wikipedia, the free encyclopedia

Union budget of India y The Union Budget of India, referred to as the annual Financial Statement[1] in Article 112 of the Constitution of India, is the annual budget of the Republic of India, presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget has to be passed by the House before it can come into effect on April 1, the start of India's financial year. Former Finance Minister Morarji Desai presented the budget eight times, the most by any.[2]
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DETERMINING GDP
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GDP can be be determined in three ways, all of which should, in principle, give the same result. They are the product (or output) approach, the income approach, and the expenditure approach. The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors ("producers," colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes.[5] Example: the expenditure method: GDP = private consumption + gross investment + government spending + (exports imports), or

GDP Highlights
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The economic growth is likely to fall to a three-year low of 6.9% in FY12, mainly due to sharp slowdown in manufacturing, agriculture and mining sectors, against 8.4% expansion in the last fiscal. The CSO's GDP growth projection is a tad lower than the 7% forecast made by the Reserve Bank of India in its quarterly monetary policy review last month.

PRODUCTION APPROACH
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CALCULATE " Market value of all final goods and services calculated during 1 year . " The production approach is also called as Net Product or Value added method.This method consists of three stages:-Estimating the Gross Value of domestic Output in various economic activities; Determining the intermediate consumption, i.e., the cost of material, supplies and services used to produce final goods or services; and finally Deducting intermediate consumption from Gross Value to obtain the Net Value of Domestic Output. Symbolically, Gross Value Added = Value of output Value of Intermediate Consumption. Value of Output = Value of the total sales of goods and services + Value of changes in the inventories. The sum of Gross Value Added in various economic activities is known as GDP at factor cost. GDP at factor cost plus indirect taxes less subsidies on products is GDP at Producer Price.

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AGRICULTURE SECTOR
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Agriculture and allied activities are likely to grow at 2.5% in FY12, compared to a robust growth of 7% in FY11, according to the Advanced Estimates released today by the Central Statistical Organisation (CSO).

Production approach
For measuring gross output of domestic product, economic activities (i.e. industries) are classified into various sectors. y After classifying economic activities, the gross output of each sector is calculated by any of the following two methods:-1. By multiplying the output of each sector by their respective market price and adding them together and 2. By collecting data on gross sales and inventories from the records of companies and adding them together.
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Subtracting each sector's intermediate consumption from gross output, we get sectoral Gross Value Added (GVA) at factor cost. 1. We, then add gross value of all sectors to get GDP at factor cost. Adding indirect tax less subsidies in GDP at factor cost, we get GDP at Producer Prices.

MANUFACTURING
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Manufacturing growth is also expected to drop down to 3.9% in this fiscal from 7.6% last year.

More on GDP Estimates

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In its mid-year Economic Review, the government had also pegged growth at around 7.5%. The current estimate is a sharply lower than the 9% growth projection for FY12 made by the government in its pre-Budget survey in February last year. The latest GDP growth estimate of 6.9% for the entire fiscal means that the pace of economic expansion slowed in the second half of FY12, given that GDP growth in the AprilSeptember, 2011, period stood at 7.3%.

Mining & Quarry

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According to the advance estimates, mining and quarrying is likely to witness a decline of 2.2%, compared to a growth of 5% a year ago.

REAL ESTATE & BFSI

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Growth in construction is also likely to slip to 4.8% in FY12, against an 8% in FY11. Furthermore, the finance, insurance, real estate and business services sectors are likely to grow by 9.1% this fiscal, against 10.4% last fiscal.

ENERGY & POWER

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According to the data, growth in electricity, gas and water production is, however, likely to be better this year. The segments are expected to grow up by 8.3% in FY12, against 3% in FY11.

HOTEL, TRADE & TRANSPORT

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During the current fiscal, the trade, hotel, transport and communication sectors are projected to grow by 11.2%, against 11.1% last fiscal. Community social and personal services are pegged to witness a growth of 5.9%, compared to 4.5% in the year-ago period.

Concluding GDP Estimate

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The government and the RBI had earlier said that global economic slowdown and the high domestic interest rate regime is likely to act as a dampener in this fiscal's growth. However, the 6.9% growth projected in the advanced estimates is lower than what experts have been forecasting. The Indian economy had expanded by 8.4% in both FY11 and FY10, while growth in FY09 was 6.7%.

Nominal GDP, Real GDP, and Price Level

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Nominal GDP is GDP evaluated at current market prices. Therefore, nominal GDP will include all of the changes in market prices that have occurred during the current year due to inflation or deflation. Inflation is defined as a rise in the overall price level, and deflation is defined as a fall in the overall price level. In order to abstract from changes in the overall price level, another measure of GDP called real GDP is often used. Real GDP is GDP evaluated at the market prices of some base year. For example, if 1990 were chosen as the base year, then real GDP for 1995 is calculated by taking the quantities of all goods and services purchased in 1995 and multiplying them by their 1990 prices.

GDP DEFLATOR
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GDP deflator. Using the statistics on real GDP and nominal GDP, one can calculate an implicit index of the price level for the year. This index is called the GDP deflator and is given by the formula.

The GDP deflator can be viewed as a conversion factor that transforms real GDP into nominal GDP. Note that in the base year, real GDP is by definition equal to nominal GDP so that the GDP deflator in the base year is always equal to 100.

Rate of inflation or deflation. deflation.

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Calculating the rate of inflation or deflation. Suppose that in the year following the base year, the GDP deflator is equal to 110. The percentage change in the GDP deflator from the previous (base) year is obtained using the same formula used to calculate the growth rate of GDP. This percentage change is found to be
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implying that the GDP deflator index has increased 10%. Another way of describing this finding would be to say that the inflation rate in the year following the base year was 10%.

CONSUMER PRICE INDEX

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The GDP deflator is not the only index measure of the price level. Among the many other price indices, the consumer price index (CPI) is the most frequently cited. The CPI differs from the GDP deflator in two important ways. First, the CPI measures only the change in the prices of a basket of goods consumed by a typical household. Second, the CPI uses base year quantities rather than current year quantities in calculating the price level index value. The formula for the CPI is given as

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