GROWTH OF GDP

BY: S.PRADEEP

Economic growth in a country is measured by the country’s Gross Domestic Product (GDP) in one year.

GDP = the total amount of final goods and services produced in one year within a country.

GROWTH OF GDP

GDP consists of consumer spending, Investment expenditure, government spending and net exports.

GDP is used as an indicator for most governments and economic decision-makers for planning and policy formulation.

In case of GDP, each component is given the weight of its relative price. In market economics it clicks as prices reflect both marginal cost of the producer and marginal utility for the consumer, i.e. people sell at a price that others are willing to pay.

GDP helps the investors to manage their portfolios by providing them with guidance about the state of the economy.

Calculation of GDP provides with the general health of the economy. A negative GDP growth portrays bad signals for the economy.

DRIVERS OF GROWTH IN ANY ECONOMY

Growth in physical capital stock – leading to a rise in capital per employee (capital deepening).

Growth in the size of the active labor force available for production

Growth in the quality of labour (human capital)

Technological progress and innovation driving productivity improvements

Institutions – including maintaining the rule of law, stable democracy, macroeconomic stability

Raising demand for goods and services – either led by domestic demand or from external trade

Increase in external trade

Political stability and military controls

The increase in the level of national savings

Reducing the capital output ratio (that’s increase the quality of capital inputs)

The protection of property rights and patents is essential in providing incentives for business and entrepreneurs to engage in R&D

The Government policy should encourage entrepreneurship as a means of creating new businesses

Increase in education, health care system and infrastructure

Investment in soft infrastructure and also in hard infrastructure

Local business growth development

STEPS TAKEN BY CHINA GOVERNMENT TO REDUCE INCOME INEQUALITY

Double Personal Income by 2020 and Raise Minimum Wage

Interest Rate Liberalization

State-Owned Enterprise Dividend Payments

Restrictions on Government Officials’ Income

The tax reforms plan introduce several tax reforms, including a consumption tax on luxury goods and high-end services

Private land ownership remains verboten in China that means by law the government owns all the land and grants farmers rights to use the land .

Increasing the domestic consumption is a crucial component of reducing the massive divide between rich and poor.

Social Safety Net calls for broadening of social safety net programs including increasing the participation of migrant workers in the pension system.

Year Growth Rate of GDP% Gini Coefficient

2003 9.99 0.479

2004 10.09 0.473

2005 11.29 0.485

2006 12.69 0.487

2007 14.19 0.484

2008 9.6 0.491

2009 9.2 0.49

2010 10.4 0.481

2011 9.3 0.477

2012 7.8 0.474

Analysis for CHINA

1 2 3 4 5 6 7 8 9 100

2

4

6

8

10

12

14

16

growth rategini co-efficient

Source of information

www.landesa.org/china

www.unescap.org

www.scribed.com

www.oecd.statextracts

Thank you