On the basis of information given below, calculate GDP.
|
(र) |
||
|
(i) |
Personal consumption expenditure |
45,000 |
|
(ii) |
Government consumption expenditure |
5,000 |
|
(iii) |
Gross domestic fixed investment |
5,000 |
|
(iv) |
Increase in inventories |
1,000 |
|
(v) |
Exports of goods and services |
6,000 |
|
(vi) |
Imports of goods and services |
7,000 |
|
(vii) |
Net indirect taxes |
3,500 |
|
(viii) |
Depreciation |
4,500 |
GDP - (i) + (ii) + (iii) + (iv) + (v) - (vi)
= 45,000 + 5,000 + 5,000 + 1,000 + 6,000 - 7,000
= 55,000
Green GNP does not take into consideration the cost in terms of (i) environmental pollution, and (ii) depletion of natural resources caused by production of output. Mere increase in GNP will not reflect improvement in quality of life if it increases environmental pollution or reduces available resources for future generations. That is why concept of Green GNP has been introduced while measuring economic welfare.
Green GNP is defined as GNP which is indicator of a sustainable use of natural environment and equitable distribution of benefits of development. This concept denotes the following characteristics (i) Sustainable economic development, i.e., development which should not cause environmental degradation (pollution) and depletion of natural resources (ii) Equitable distribution of benefits of its of development. (iii) Promotes economic welfare for a long period of time.
Expressed in the form of an equation:
Green GNP = GNP - Net fall in stock of national capital.
Is GDP a correct Index of Welfare? Often GDP (real GDP) is considered as an index of welfare of the people. Welfare means sense of material well-being among the people. This depends upon availability of goods and services per person for consumption. When GDP (or GNP) rises, it shows increase in flow of goods & services. Greater availability of goods and services implies higher standard of living which increases economic welfare. So one may conclude that higher level of GDP is an index of greater well-being of the people. But this may not be correct due to following limitations or reasons.
(i) Distribution of GDP. A mere rise in GDP (or GNP or National Income) may not lead to rise in economic welfare if its distribution results in concentration of income in the hands of very few individuals or firms. A mere increase in GDP does not mean that every individual automatically gets this much of increase. Distribution of GDP might have resulted in making the rich richer and the poor poorer leading to further increase in the gap between rich and poor.
(ii) Non-monetary exchanges or transactions. Many economic activities in the economy are not evaluated in monetary terms. Thus non-market transactions like services of housewife, exchanges through barter, enjoyment from hobbies like painting, gardening, etc. which increase economic welfare are not included in measuring GDP. Hence GDP may not reflect actual productive activities and wellbeing of the country.
(iii) Externalities. These refer to the benefits or harms which a firm or an individual causes to other in the process of production but for which they are not paid or penalised. For example, negative externalities occur when smoke of a factory pollutes the air or its industrial wastes causes water pollution in the nearby river resulting in loss of social welfare. But nobody is penalised for it nor it is accounted in GDP. GDP does not take into account these externalities. Similarly, positive (beneficial) impact of beautiful garden remains outside of realm of GDP. To that extent GDP is not a correct index of welfare as GDP is then underestimated or overestimated.
(iv) Composition of GDP. In case increase in GDP is due to more production of war material like tanks, weapons, etc., it will not increase economic welfare.
(v) Rate of population growth. If rate of population growth is higher than the rate of growth of Real GDP, this will lead to fall in per capita availability of goods and services. This may reduce the overall welfare of the society.
Conclusion. GNP may not be an adequate index due to above-mentioned limitations, yet it does reflect some index of economic welfare. Mere enhancement of GNP at any cost may create economic bads like poverty and pollution. That is why some economists have suggested an alternative measure by the name of Green GNP to widen the scope of GDP as a measure of welfare.
From the following transactions find out NNP.
|
(र) |
||
|
(i) |
Household expenditure on consumption |
1,00,000 |
|
(ii) |
Government expenditure on consumption |
12,500 |
|
(iii) |
Gross capital formation |
25,000 |
|
(iv) |
Depreciation |
6,000 |
|
(v) |
Exports |
6,000 |
|
(vi) |
Imports |
9,000 |
|
(vii) |
Net earned income from abroad |
750 |
GDPMP = (i) + (ii) + (iii) + (v) - (vi)
= 1,00,000 + 12,500 + 25,000 + 6,000 - 9,000
= 1,34,500
NNPMP = GDPMP - (iv) + (vii)
= 1,34,500 - 6,000 + 750
= 1,29,250
Calculate (a) GNP at MP, and (b) NNP at FC from the following data:
|
(र in crores) |
||
|
(i) |
Gross domestic capital formation |
94 |
|
(ii) |
Net exports |
(-) 6 |
|
(iii) |
Private final consumption expenditure |
260 |
|
(iv) |
Net factor income from abroad |
(-)3 |
|
(v) |
Consumption of the fixed capital |
39 |
|
(vi) |
Net change in stocks |
11 |
|
(vii) |
Net indirect taxes |
43 |
|
(viii) |
Government final consumption expenditure |
47 |
(a) GNP at MP = 392 crores
(b) NNP at FC = 310 crores
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