GDP Growth Rate: How is it computed? – By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

One of the well-established methods in computing the GDP of India is based upon the factor cost of the following eight individual items. To illustrate as to how it is computed let us do the comparison between the financial years FY 12 and FY 13 using the factual data provided by the CSO.


Factors contributing to the GDP growth rate In crores (2011 – 2012) In crores (2012 -2013)
Agriculture Forestry Fishing Rs. 739495 Rs. 752746
Mining and Quarrying Rs. 108249 Rs. 108743
Manufacturing Rs. 823020 Rs. 838541
Electricity gas and water supply Rs. 988814 Rs. 103642
Construction Rs. 412412 Rs. 436637
Trade, Hotels and communication Rs. 1440312 Rs. 1514543
Financing insurance real estate business services Rs. 948808 Rs. 1030683
Community social personal services Rs. 672469 Rs. 717971
Total 5, 243, 582 5, 503, 476


Special Observations

  1. Trade hotels and communication contribute the highest amount towards the GDP followed by Finance insurance real estate business and services
  2. Community social personal services generate significant contribution towards the growth in GDP
  3. Mining and Quarrying contributes the minimum towards the GDP growth
  4. From a GDP of 2012-13 amounting to 5.503476 lakh crore rupees. We desire to achieve 6 to 8 percent per year to achieve the desired target. The challenges are clear. Manufacturing (item #3), electricity gas water supply (item #4) should be encouraged to grow rapidly. This will provide the foundation for greater growth and also create jobs
  5. However they require a huge outlay. We don’t have enough savings to jumpstart this and so the government should seek the help of China who have become incredibly rich in the recent years. They have invested close to 1 trillion dollars in the US government bonds and can easily provide us the necessary funds
  6. Japan also has a huge trade surplus and can definitely help us in terms of both money and technology
  7. To achieve food self-sufficiency we need to increase our output from 260 million tonnes of cereal approx. to around 330 million tonnes. This will not only require additional money to bring more land into cultivation along with latest technology to achieve increased productivity.

Growth rate of                                          5503476 – 5243582

2012 – 13 over                             ______________________ x 100 % = 4.956%

2011 – 12 is                                               5503476


It has just been announced that the economy expanded by 4.7 percent (Provisional Estimate) and the per capita net national in real terms (at 2004 – 05 prices) in 2013-14 is Rs. 39904 against Rs. 38.856 in the previous year a growth of 2.7 percent. Finally unless an out of the box thinking and action takes place, Indian economy will continue to flounder because of reduced internal savings, capital formation and poor labour productivity.

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