The idea of gross domestic product, or GDP, arose from the carnage of the Great Depression and World War II: the ultimate measure of a country’s overall welfare, a window into an economy’s soul, the number to end all statistics. Its popularity grew quickly, and it became the century’s defining indicator. However, in today’s globalized world, it’s becoming clear that this Nobel Prize-winning criteria is too limited for these difficult economic times.
In his report to the United States Congress, “National Income, 1929-35,” Simon Kuznets, an economist at the National Bureau of Economic Research, offers the initial formulation of gross domestic product. His proposal is to combine all economic production by individuals, businesses, and the government into a single metric that rises in good times and falls in bad. GDP is conceived.
1944: GDP became the standard instrument for assessing a country’s economy following the Bretton Woods conference, which established international financial organizations such as the World Bank and the International Monetary Fund.
When did the GDP begin?
The gross domestic product (GDP) is the most often used indicator of economic activity. At the end of the 18th century, the first basic concept of GDP was developed. The contemporary notion was devised by American economist Simon Kuznets in 1934 and recognized as the primary indicator of a country’s economy at the 1944 Bretton Woods Conference.
When did we start using GDP instead of GNP?
GDP is significant because it indicates whether the economy is expanding or declining. Since 1991, the United States has utilized GDP as its primary economic metric, replacing GNP as the most widely used measure internationally.
When did the United States begin to calculate GDP?
The Bureau of Economic Analysis began releasing estimates of gross domestic product (GDP) as its featured measure of U.S. production in November 1991, rather than gross national product (GNP), the measure in use since 1934, with the comprehensive update of the National Income and Product Accounts (NIPAs). “Gross Domestic Product as a Measure of U.S. Production,” an article in the August 1991 issue of Survey of Current Business, introduced the new featured measure as well as the transition from GNP to GDP.
Did Simon Kuznets invent Gross Domestic Product?
GDP’s beginnings Economic measurements were rare, and GDP the standard by which we value our economy today had not yet been invented. Simon Kuznets, please. He devised a standard way of quantifying the US gross national product, or GNP, as a statistician, mathematician, and economist.
What are the three different types of GDP?
- The monetary worth of all finished goods and services produced inside a country during a certain period is known as the gross domestic product (GDP).
- GDP is a measure of a country’s economic health that is used to estimate its size and rate of growth.
- GDP can be computed in three different ways: expenditures, production, and income. To provide further information, it can be adjusted for inflation and population.
- Despite its shortcomings, GDP is an important tool for policymakers, investors, and corporations to use when making strategic decisions.
What are GDP’s four components?
The most generally used technique for determining GDP is the expenditure method, which is a measure of the economy’s output created inside a country’s borders regardless of who owns the means of production. The GDP is estimated using this method by adding all of the expenditures on final goods and services. Consumption by families, investment by enterprises, government spending on goods and services, and net exports, which are equal to exports minus imports of goods and services, are the four primary aggregate expenditures that go into calculating GDP.
In 2021, what would India’s GDP be?
In its second advance estimates of national accounts released on Monday, the National Statistical Office (NSO) forecasted the country’s growth for 2021-22 at 8.9%, slightly lower than the 9.2% estimated in its first advance estimates released in January.
Furthermore, the National Statistics Office (NSO) reduced its estimates of GDP contraction for the coronavirus pandemic-affected last fiscal year (2020-21) to 6.6 percent. The previous projection was for a 7.3% decrease.
In April-June 2020, the Indian economy contracted 23.8 percent, and in July-September 2020, it contracted 6.6 percent.
“While an adverse base was expected to flatten growth in Q3 FY2022, the NSO’s initial estimates are far below our expectations (6.2 percent for GDP), with a marginal increase in manufacturing and a contraction in construction that is surprising given the heavy rains in the southern states,” said Aditi Nayar, Chief Economist at ICRA.
“GDP at constant (2011-12) prices is estimated at Rs 38.22 trillion in Q3 of 2021-22, up from Rs 36.26 trillion in Q3 of 2020-21, indicating an increase of 5.4 percent,” according to an official release.
According to the announcement, real GDP (GDP) or Gross Domestic Product (GDP) at constant (2011-12) prices is expected to reach Rs 147.72 trillion in 2021-22, up from Rs 135.58 trillion in the first updated estimate announced on January 31, 2022.
GDP growth is expected to be 8.9% in 2021-22, compared to a decline of 6.6 percent in 2020-21.
In terms of value, GDP in October-December 2021-22 was Rs 38,22,159 crore, up from Rs 36,22,220 crore in the same period of 2020-21.
According to NSO data, the manufacturing sector’s Gross Value Added (GVA) growth remained nearly steady at 0.2 percent in the third quarter of 2021-22, compared to 8.4 percent a year ago.
GVA growth in the farm sector was weak in the third quarter, at 2.6 percent, compared to 4.1 percent a year before.
GVA in the construction sector decreased by 2.8%, compared to 6.6% rise a year ago.
The electricity, gas, water supply, and other utility services segment grew by 3.7 percent in the third quarter of current fiscal year, compared to 1.5 percent growth the previous year.
Similarly, trade, hotel, transportation, communication, and broadcasting services expanded by 6.1 percent, compared to a decline of 10.1 percent a year ago.
In Q3 FY22, financial, real estate, and professional services growth was 4.6 percent, compared to 10.3 percent in Q3 FY21.
During the quarter under examination, public administration, defense, and other services expanded by 16.8%, compared to a decrease of 2.9 percent a year earlier.
Meanwhile, China’s economy grew by 4% between October and December of 2021.
“India’s GDP growth for Q3FY22 was a touch lower than our forecast of 5.7 percent, as the manufacturing sector grew slowly and the construction industry experienced unanticipated de-growth.” We have, however, decisively emerged from the pandemic recession, with all sectors of the economy showing signs of recovery.
“Going ahead, unlock trade will help growth in Q4FY22, as most governments have eliminated pandemic-related limitations, but weak rural demand and geopolitical shock from the Russia-Ukraine conflict may impair global growth and supply chains.” The impending pass-through of higher oil and gas costs could affect domestic demand mood, according to Elara Capital economist Garima Kapoor.
“Strong growth in the services sector and a pick-up in private final consumption expenditure drove India’s real GDP growth to 5.4 percent in Q3.” While agriculture’s growth slowed in Q3, the construction sector’s growth became negative.
“On the plus side, actual expenditure levels in both the private and public sectors are greater than they were before the pandemic.
“Given the encouraging trends in government revenues and spending until January 2022, as well as the upward revision in the nominal GDP growth rate for FY22, the fiscal deficit to GDP ratio for FY22 may come out better than what the (federal) budget projected,” said Rupa Rege Nitsure, group chief economist, L&T Financial Holdings.
“The growth number is pretty disappointing,” Sujan Hajra, chief economist of Mumbai-based Anand Rathi Securities, said, citing weaker rural consumer demand and investments as reasons.
After crude prices soared beyond $100 a barrel, India, which imports virtually all of its oil, might face a wider trade imbalance, a weaker rupee, and greater inflation, with a knock to GDP considered as the main concern.
“We believe the fiscal and monetary policy accommodation will remain, given the geopolitical volatility and crude oil prices,” Hajra added.
According to Nomura, a 10% increase in oil prices would shave 0.2 percentage points off India’s GDP growth while adding 0.3 to 0.4 percentage points to retail inflation.
Widening sanctions against Russia are likely to have a ripple impact on India, according to Sakshi Gupta, senior economist at HDFC Bank.
“We see a 20-30 basis point downside risk to our base predictions,” she said. For the time being, HDFC expects the GDP to rise 8.2% in the coming fiscal year.
Was GDP invented by Adam Smith?
Smith is also credited with coining the term “gross domestic product” (GDP) and developing a theory to compensate for pay disparities. 2 According to this notion, dangerous or unappealing jobs pay greater wages in order to attract workers to them.
What was the standard before GDP?
Unlike our sister site FRED’s cleanly presented graphics, FRASER’s statistical data sets take a little more time and effort to find and use. Furthermore, today’s economic metrics and concepts (what FRED refers to as “headline figures”) are largely new inventions. As a result, comprehending economic history frequently necessitates first comprehending the history of available economic data.
The most well-known economic dataset (an example) “Gross domestic product, or GDP, is an economic statistic that aims to estimate the value of a country’s economy. GDP arose from a series of attempts to quantify the US economy in the twentieth century. You may read many histories of GDP and related metrics authored by economists, historians, and journalists by conducting a quick online search, but you can also trace much of the history of national economic data right here on FRASER.
There was no standardized way to estimate the strength of the overall economy like GDP does now up until and through much of the Great Depression. Industrial output statistics, stock counts, and even freight transportation data were used by economists and politicians to get a picture of the country’s economic health. The Statistical Abstract of the United States, published by the Department of Commerce in the early nineteenth century, concentrated mostly on money and commodities, which could be easily quantified.
Adolph C. Miller, an economist and a founding member of the Federal Reserve Board, argued in 1918 that, because of the economic realities of financing World War I, “There had been “no official or authoritative estimate of the current annual income of the people of the nation,” and the national income estimates available at the time significantly underestimated the country’s economic situation. In an attempt to address the perceived undercounting, he used data from the US Census Bureau, Department of Agriculture, Geological Survey, and Bureau of Labor Statistics to calculate national income. The Federal Reserve has provided statistical releases since its inception, attempting to fill in gaps in our understanding of the nation’s economic health by tracking not only banking and finance statistics but also industrial production, retail sales, and other indicators.
Congress requested that the Federal Trade Commission (FTC) evaluate the nation’s wealth and income in the postwar years, noting that the FTC had failed to do so “We can only infer trends from the large amount of statistical data available in the country, and even then only with some uncertainty.” This was a preliminary step toward calculating the economy’s entire valuehow much money it generates “obtains.” The FTC produced a report of its estimates in 1926, based on comparable work by the Census Bureau. The FTC stated that the study’s limitationswhich solely examined “material wealth”were “insignificant in compared to what some may incorrectly expect of such an estimate.”
Throughout the 1920s, economists refined and enlarged their estimations of the value of the American economy. The advent of these revolutionary national economic statistics was significant news in business circles, but the new data were not nearly the harbinger expected. The Commercial and Financial Chronicle, for example, published barely two months after the stock market crash on December 28, 1929, featured a National Bureau of Economic Research (NBER) study boasting of “the country’s income has been on an almost constant growth trend for the past two decades.”
The Great Depression began to spread across the country not long after the crash, forcing Congress to seek for better economic data once more. In response, the Bureau of Foreign and Domestic Commerce of the Department of Commerce, in collaboration with academics from the National Bureau of Economic Research (NBER) and led by economist Simon Kuznets, produced the important study “The National Income from 1929 to 1932.” This report and its methods have established a new benchmark for gauging the economy in the United States. In the years after that inaugural research, the Bureau, which eventually became the Bureau of Economic Analysis (BEA), switched its focus in its Survey of Current Business from early monthly indicators such department store sales, freight car loadings, and bank loans to national income. The first regular publishing of national income data, in the August 1934 Survey, was accompanied by strong cautionary statements regarding the data’s preliminary nature and the risks associated with it “There are challenges in making reliable estimates.” These figures were updated once a year beginning in November 1934, however national income was not included in the monthly numbers until March 1938.
National income had become the most referenced U.S. economic figure by the early 1940s, according to the BEA’s 2007 history of national income statistics. The Survey finally received preliminary estimates of gross national product (GNP, a measure of national revenue) for 1929-41 in May 1942. National income indicators did not rise to the top of the monthly business indicators until the late 1940s, and they have remained there ever since (under various names). The Survey started publishing data on the relationships between gross national product, net national product, and national income in the mid-1970s, reflecting new approaches for evaluating the economy’s strength. GNP was the BEA’s headline figure until late 1991, when it was replaced with GDP. The August 1991 Survey detailed the differences between the two measurements and why the decision to GDP was made.
Historical studies and reports on GDP and its precursors by Federal Reserve Banks, the Board of Governors, the Bureau of Labor Statistics, and others can be found by digging further into FRASER. When looking at past economic policy decisions, it’s helpful to know what data was available and how it might have influenced those decisions.