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GDP ECONOMIC GROWTH OF INDIA AND USA

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 GDP ECONOMIC GROWTH OF INDIA AND USA

Introduction

GDP of a country is based on the total market value of all final goods and services thereby acting as a monetary measure which helps to determine their economic performance. It is an important tool which helps to measure and compare the financial situation with other international countries thereby determining their development rate. The Cost of living of the country and inflation rates are also based on the GDP per capita of the country thereby determining their purchasing power parity (PPP). This helps to analyze the differences in living standards of the various countries and their hold in the world economy. The study aims at analyzing the GDP account rates between two chosen countries thereby identifying their economic growth rates.

Compare and contrast GDP

The GDP of a country can effectively be compared with another country by identifying the three main concepts of Exchange rate, purchasing power parity and GDP per capita. The two chosen countries are India and USA whose GDP determines their economic hold of the world. India falls under the category of developing countries whose GDP is estimated to be around 2.264 Trillion USD. However the value of Rupees being less as compared to that of Dollars in US, their economy is still on the rise to become one of the developed countries of the world. The GDP of USA on the other hand is around 18.57 Trillion USD which has a vast difference when compared with that of India.

The economy of the country is positively high thereby determining their high living standards. It is evident from the fact that US has the world's largest economy based on nominal GDP and the second largest based on purchasing power parity. India on the other hand is the sixth largest economy based on nominal GDP and the third largest based on purchasing power parity. Being one of the fastest growing service sectors of the world, their annual growth rate has been increasing above 9% since 2001.

Knowledge of GDP accounting methods

GDP refers to a monetary value based on the local currency focusing on all the goods and services produced within a particular country. When taken the example of India, an increase of growth rate by 7.1% the country is likely to attain 121.65 lakh crore INR in the year of 29016-17. US dollar on the other hand acts as the world’s primary reserve currency. By the year 2017, they had approximately reached an estimate of about $1.58 trillion out of which $1.53 trillion were in Federal Reserve notes. The GDP accounting methods aim at encompassing all the private expenditures, government spending and investments followed by exports to measure the particular nation’s total economic activity. 

The GDP of the country is based on some important formulas which include Expenditure approach, Income approach, and Value added approach. Following these approaches help to analyze the areas where the country spends and their participation in the economic activities. Income approach helps to identify the total national income of the country and their tax rates which help to add o n to the government revenues and total GDP of their country. US having 64.886 trillion of their net national income found in 2014 can easily beat the national income of India 133.81 lakh found in the year of 2016-17. Based on these income approaches, several factor incomes are summed up to the factors of production where the net worth of the product of the country can be referred to as value added approach. It has been seen that in India, the net worth is quite high which makes it difficult to cope up with limited income unlike in US where the income level is far more as compared to the factors of production thereby enhancing their standard of living.

Components of GDP

The four main components of every country’s GDP include private consumption expenditure, Investment expenditure, Government purchase of goods and services and the country’s net exports. Based on the World Bank collection of development indicators, India's private consumption expenditure has been reported to be 358.48 USD bn in the year of 2017 which however is much less when compared with that of US which is about 68.1% in 2015. This proves that with the increase in private consumption expenditure of the country, their income and consumption level increases resulting in inflation which results in an increase in the total GDP of the country. 

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