What is GDP? (English)

GDP

Once my DAD asked me: “What is GDP beta!! Every day I saw in TV and Paper GDP GDP, What is the GDP?”

Me: I explained him in Bookies way, even I had very poor Knowledge on that topic so I was not been able to explain in LAYMAN WAY however my DAD is belonging to a Technical Filed so it’s quite natural nothing gets into his mind. I was get upset and did google almost whole the night and looking for best answers to make easily understandable to my DAD as well as to those people who doesn’t belonging to the financial Filed.

As I 1stly found in google & got the definition i.e.” The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis.”
 Formula:
GDP= R+I+P+SA+W
Where R : rents, I : interests, P : profits, SA : statistical adjustments, W : wages.

Now, What I told to my DAD was and what is the meaning of above definitions are:

GDP actually is the amount of money that exchanges in hands.
 That's mean- Hum log jo paisa likhit main adan pradan karte hain, use agar jor diya jaiye toh usey GDP kahete hain.
Example: Let see how it happens- A standing tree doesn’t itself contribute GDP. The moment we cut it, GDP increases. The Monitory & Economic transaction involved in the process starting from cutting the tree transforming it into finished goods to selling into Market, is the effect on GDP.

Then he asked: So what is GDP Growth actually? And I usually heard, “we have increased our GDP by certain percentage. And if we invest capital in certain projects, so our GDP will grow” What is that means?

Me: I replied, ye jada complex kuch nahi hain, sidhe sidhe bolne se- GDP value is basically compared with previous year/quarter and positive result shows GDP increase and vise verse.
Example: Increases GDP by 3% means the value of percent GDP has increased by 3% from previous year/quarter.

Dad asked with full curiosity: Somewhere I read a news, where I found the headings like, USA GDP growth is 1.3% and INDIA is 5.6%, so, it’s means INDIA is better performer?

I Replied: But A small clarification, that, we should not judge countries by simply comparing GDP growth %. In 2013 India GDP growth rate was 5.6% whereas the same of America (USA) was 1.3%. But this doesn't mean that America (USA) had poor performance economically.
Value wise:
INDIA's GDP was 1.86 USD Trillion in 2013,
Whereas America (USA) GDP was 16.8 USD trillion for the same year,
i.e. almost 9 times greater than INDIA.

Finally DAD understood and makes a conclusion on my initially given EXAMPLE: So that standing tree is equivalent to no GDP. The moment we cuts it GDP increases. (And Laugh) (I Was Satisfied when DAD Laughed)
*Above statement is intended for simple understanding, please I am strongly against cutting tree.
       Few example of increasing of GDP:
If you want to grow GDP pollute the River. Sarcastically speaking but it will help me in making you better understand how it works.
1stly, If the River is clean, it will have no impact on GDP (like the standing tree) and if we pollute the River, GDP will grow not by once, not even by twice even Thrice and more.
 Let see how:
We all know that firstly Industrialization helps in GDP growth.
Secondly, Now waste effluent from the industries flows into the River, in order to clean the River, govt invest thousand of crores & for that increase the GDP.
Thirdly, drinking the polluted water effect our healt & we spend money for doctor fees.

(To sum up I can say, investment and our expenditure helps in growth of GDP)
Russia GDP is very week, therefore their's budget always mention that there won't be any thing duty levied on CIGARETTE /ALCOHOL, which form to negative way to increase GDP.

Finally Conclude, Hope you Like It.  

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