IMPORTANCE OF GROSS DOMESTIC PRODUCT

 What is GDP?

During a specified period of time, the final monetary value of all the goods and services produced within the geographic location like a country is gross domestic product (GDP). It can  be even a quarter or a year. If we take a given country’s current economic well-being, it functions as a tentative scorecard as a broad measure of overall domestic production of a country. GDP is most often calculated on an annual basis and sometimes calculated on a quarterly time frame as well. An annual report of the GDP estimate for each fiscal quarter and also for the economic calendar  year is released by the government in India. 






Importance of GDP

 

  1. One of the best single indicators of economic growth is GDP growth rate indicator which accurately predicts the size of an economy.


  1. GDP is of great importance to central banks and policymakers to judge whether the economy  needs an uplift or needs to be restrained, is contracting or expanding, and if the possible threats such as a recession or rampant inflation are found or are close to it.


  1. In order to measure GDP, NIPA i.e. national income and product accounts lay out rules and allow policymakers, economists, and businesses to analyze the impact of variables such as the monetary and fiscal policy, economic blunders, such as a rise in the oil price, and tax and spending budgets on specific sectors of an economy, as well as on the overall economy itself.


  1. Since the end of World War II, national accounts have had a major contribution in significantly reducing the harsh business cycles along with better-introspective policies and institutions.


Advantages of GDP

 

  • Gross domestic product (GDP)  is the best indicator of development if we look in terms of how broad it’s reach is and also the expenditures that it covers.


  • It also forms a very reliable source of information when comparing one's previous years of GDP and with other countries and it is quite easy to measure gross domestic product (GDP)  in terms of percentage.


  • It can be regarded as a universal safe indicator, as the calculations methods are used by all the countries worldwide to calculate their economies efficiently. 


  • To know whether economic policies have been successful or not, and to what extent they have or have not been, it is an absolutely amazing way for governments.


  • In comparison, it is a cheap method and also the process of collection of data is simple which makes its working smooth and non-troublesome.



Conclusion

 

Due to its various advantages, we can conclude that GDP is the most appropriate method for calculating economic development. It has been usually criticized that it is unable to measure quality of life, standard of living and even political freedom among many others, despite these laurels under the method’s belt. This depicts that no method is completely perfect and  accurate but still GDP is a quite an effective method especially in terms of finance and economic growth. 
Location: Noida, Uttar Pradesh, India

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