60-second revision
- GDP = value of final goods and services produced within the domestic territory in a period (territorial concept).
- GNP = GDP + net factor income from abroad (national concept). NNP = GNP - depreciation.
- NNP at factor cost = national income (traditional definition).
- GDP at market prices = GVA at basic prices + product taxes - product subsidies.
- GDP deflator = nominal GDP / real GDP x 100; it covers all goods and services in GDP.
- National accounts are compiled by the NSO (MoSPI); new GDP series with base year 2022-23 released on 27 February 2026, replacing 2011-12.
- Transfer payments, second-hand sales and intermediate goods are excluded; imputed rent of owner-occupied houses is included.
- First estimate of India's national income: Dadabhai Naoroji (1867-68); National Income Committee 1949 chaired by P. C. Mahalanobis.
What national income measures
National income accounting answers one question: how much did an economy produce in a year? Because the same output is also earned as income and spent by buyers, output, income and expenditure are three views of the same total. In India the accounting year is the financial year, April to March.
Only final goods and services are counted. Steel sold to a car maker is an intermediate good; counting both the steel and the car would count the steel twice. Economists avoid this double counting either by valuing only final products or by adding up the value added at each stage of production.
The family of aggregates
| Aggregate | How it is derived | Idea |
|---|---|---|
| GDP | Value of final output produced within the domestic territory | Territorial: who produces does not matter, where does |
| GNP | GDP + net factor income from abroad (NFIA) | National: output owned by the country's residents |
| NDP | GDP - depreciation (consumption of fixed capital) | Net of wear and tear of machines and buildings |
| NNP at market prices | GNP - depreciation | Net national output valued at market prices |
| NNP at factor cost | NNP at market prices - net indirect taxes | National income: what factors (land, labour, capital, enterprise) earn |
| Per capita income | National income / population | Average income per person, a rough welfare measure |
Basic prices, factor cost and market prices
Since the 2015 revision of the national accounts, India measures sector-wise output as Gross Value Added (GVA) at basic prices, in line with the UN System of National Accounts. Basic prices include production taxes (like land revenue or stamp duty) less production subsidies, but not product taxes like GST. The chain is: GVA at factor cost + production taxes - production subsidies = GVA at basic prices; GVA at basic prices + product taxes - product subsidies = GDP at market prices.
Three methods of measurement
- Product or value-added method: add the value added by every enterprise (output minus intermediate consumption) across primary, secondary and tertiary sectors.
- Income method: add compensation of employees, rent, interest, profits and mixed income of the self-employed.
- Expenditure method: GDP = C + I + G + (X - M), that is private consumption + investment + government purchases + net exports.
India uses the product and expenditure approaches most, as income data for the large informal sector are thin.
What is in and what is out
| Included | Excluded |
|---|---|
| Imputed rent of owner-occupied houses | Transfer payments: pensions, scholarships, unemployment allowance |
| Brokerage or commission on second-hand sales | Value of second-hand goods resold |
| Produce kept by farmers for own consumption | Purely financial transactions such as buying shares or bonds |
| Services of government employees | Unpaid household work such as cooking for one's family |
| Change in stocks (inventories) | Intermediate goods (to avoid double counting) |
Real vs nominal, and the deflator
Nominal GDP values output at current-year prices; real GDP values it at constant base-year prices, so it grows only when quantities grow. Growth rates quoted in exams and news are real GDP growth. The GDP deflator = nominal GDP / real GDP x 100. Example: if nominal GDP is Rs 330 lakh crore and real GDP is Rs 300 lakh crore, the deflator is 110, meaning the overall price level is 10% above the base year.
The deflator is broader than CPI or WPI because it covers everything produced domestically, including services and investment goods, but it excludes imports. Its weights also change every year with the pattern of output.
Who compiles India's numbers
The National Statistics Office (NSO) under the Ministry of Statistics and Programme Implementation releases annual and quarterly GDP estimates (advance, provisional and revised). The NSO was formed in 2019 by merging the Central Statistics Office and the National Sample Survey Office. A new series with base year 2022-23 was released on 27 February 2026, replacing the 2011-12 base; base years are revised periodically so weights reflect the current structure of the economy.
History you are expected to know
- Dadabhai Naoroji gave the first estimate of India's per capita income, for 1867-68, in 'Poverty and Un-British Rule in India', along with the drain theory.
- V. K. R. V. Rao made the first scientific estimate (for 1931-32), using a mix of the product and income methods.
- The National Income Committee (1949) was chaired by P. C. Mahalanobis, with D. R. Gadgil and V. K. R. V. Rao as members.
- 'Hindu rate of growth' was the term coined by economist Raj Krishna for India's slow growth of about 3.5% a year from the 1950s to the 1980s.
Growth vs development
Economic growth is a rise in real output (a quantitative idea). Development is broader: it includes better health, education, equality and freedom. A country can grow without developing much if gains are narrowly shared, which is why indices like the HDI and MPI are used alongside GDP. Structurally, India's services sector contributes the largest share of GVA, while agriculture's share of output is far smaller than its share of employment.
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