Introduction Hitendra Yadav An Engineer uPSC CSE Hobbies - Reading Novels unacademu user name - @ititendra This is UPSC! Yaha UMMID nahi, ZIDD honi chaiye. Anonymous
Economic Growth V/s Economic Development Lession -I
Nominal GDP versus Real GDP .Nominal GDP is the money value of all the goods and services produced in a year. Nominal GDP is calculated at the current market prices. Suppose, India as a country only produced cars in its economy. In the year 2016, India produced 100 Cars which were sold at RS 100,000 each. India's GDP in this case will be RS 10,00,00,00 In the year 2017, supposedly due to demonetization India only produced only 90 Cars, but their price has risen to RS 15,0000 India's GDP in the year 2017 will be 1,35,00,000. . . The Increase from RS 10,00,00,00 to RS 1,35,00,000 is the nominal GDP DON'T STUDY TO EARN, STUDY TO LEARN WHAT YOU LEARN TODAY IS WHAT YOU WILL BECOME TOMORROW ANONYMOUS
Nominal GDP versus Real GDP The Real GDP is calculated as the money value of all the goods and services produced in a year using the constant set of market prices that have prevailed in the certain chosen base year. Suppose, India as a country only produced cars in its economy. In the year 2016, India produced 100 Cars which were sold at RS 100,000 each. India's GDP in this case will be RS 10,00,00,00 (100 100000). In the year 2017, supposedly due to demonetization India only produced only 90 Cars. If we take the year 2011-12 as the base year and assumes that the price of the car in that year was RS 90,000. Then, India's Real GDP will be 90*90,000= 81,00,000. . . The Nominal GDP is RS 1,35,00,000 whereas the Real GDP is Rs. 81,00,000. . Push yourself Because no one else is going to do it for you.
Limitations of the Concept of GDP/Economic Growth GDP has the problem of Double Counting of goods and Services. GDP fails to include the services of House wives and other hidden employees. GDP does not include the overall well being of the citizens Limitations GDP is only a monetary concept. It doen not reflect the improvements or deteriorations in Standard of Livings. A high GDP does not means Good Life. GDP does not capture the impact of externalities like pollution on human health. A
Suppose, due to unemployment in the economy the youth drifts towards Crime. To overcome the crime rate, the government decides to hire more police personnel Due to the hiring of police personnel, the economic activity in the economy increased as the newly employed personnel will be paid salaries, which they will spend on purchasing goods and services. Hence Production of Goods and services will increase. The final outcome is increase in the GDP Now tell me is this increase in the GDP is worth considering? The GDP has risen due to wrong reason, i.e., increase in crime. Suppose, the Government of India decides to mine resources from the fragile Western Ghats. The mining of the resource leads to the production of resources which are used in the production of goods and services. The increased production will lead to increase in the GDP. But, due to mining activity, the population near the Ghats were disposed of or removed. At the same time, the mining activity has made the region prone to flooding. The floods in the coming year will destroy valuable life and property. The loss due to dispossession and flooding will not be captured in the calculation of the GDP. Thus, in this case also GDP has risen but at the cost of negative externality in the form of loss of livelihood and lives.
The world is the great gymnasium where we come to make ourselves strong. -Swami Vivekananda