Measurement of Economic Growth

Expenditure Approach

In this, GDP is equal to total spending on all final goods and services (consumption goods and services (C) + Gross Investments (I) + Government Purchases (G) + (Exports (X) – Imports (M))

GDP = C + I + G + (X-M)

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Income
Approach

In this, GDP is calculated by adding up the factor incomes to the factors of production in the society:

  • GDP = National Income (NY) + Indirect Business Taxes (IBT) + Capital Consumption Allowance and Depreciation (CCA) + Net Factor Payments to the rest of the world (NFP)
  • NY = Employee Compensation + Corporate Profits + Proprietor’s Income + Rental income + ....

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Indian Economy & Socio-economic Development