What is GDP?

The country’s gross domestic product (GDP) is estimated to grow at 6.5 percent during 2017-18 — a four year low. Data released Friday by the Central Statistics Office (CSO) showed growth was lower than the 7.1 percent GDP growth in the previous financial year on account of slowdown in the agricultural and manufacturing output. The advance estimate for Gross Value Added (GVA), the more closely watched indicator for growth, is estimated at 6.1 percent for 2017-18, down from 6.6 percent in the previous financial year.

The estimates form a key input for the Union Budget 2018-19, scheduled to be presented on February 1. The economy grew by 5.7 percent in the first quarter and by 6.3 percent in the second quarter of the fiscal.

The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period; you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, the Q3 2017 GDP is up three percent this is thought to mean that the economy has grown by three percent over the third quarter.

Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total.

The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending, and net exports.