DHARMASHASTRA NATIONAL LAW

UNIVERSITY, JABALPUR

ECONOMOICS PROJECT

“FACTORS AFFECTING GDP OF INDIA”

SUBMITTED TO : SUBMITTED BY :
ESHA WADHWA KISHAN SINGH PARIHAR
(Assistant Professor of Economics) BAL/049/18
ACKNOWLEDGEMENT

This Project, like any other, could not have been completed without the guidance, help and
support from various quarters.

First and foremost, I would like to express my deep sense of gratitude to my supervisor,
Assistant Professor Mrs. ESHA Wadhwa, National Law University, Jabalpur who has supervised
this work and vastly enriched my understanding of the “FACTORS AFFECTING GDP IN
INDIA” despite his busy schedule and other onerous responsibilities, he gave me his precious
time and ideas, fruitful suggestions on the subject and energy to look at the final draft of this
work. I am warmly and gratefully thankful for her invaluable, experienced and scholarly
guidance.

I would like to express my sincere gratitude to Professor Balraj Chouhan, Vice Chancellor,
National Law University, Jabalpur. His significant expertise on various field of law has always
motivated me to achieve my goals at various juncture of life. I respectfully express my thanks to
him.

Lastly, but most importantly I thank to God who has given me strength to achieve my goal.

Date: Kishan Singh Parihar

Contents

INTRODUCTION...........................................................................................................................5

PRESENT SCENARIO..................................................................................................................5

What Is GDP?..................................................................................................................................6

Calculating GDP..............................................................................................................................6

GDP Formula Based on Spending............................................................................................6

GDP Based on Production........................................................................................................6

GDP Based on Income.............................................................................................................7

TYPES OF GDP..............................................................................................................................7

FACTORS THAT AFFECT THE GDP OF INDIA........................................................................8

Natural Resources.....................................................................................................................8

Physical Capital or Infrastructure.............................................................................................8

Population or Labor..................................................................................................................8

Human Capital..........................................................................................................................8

Technology...............................................................................................................................9

Law...........................................................................................................................................9

Poor health and low levels of education...................................................................................9

Lack of necessary infrastructure...............................................................................................9

CONCLUSION..............................................................................................................................11
RESEARCH OBJECTIVE

 To understand the concept of GDP

 To know about the present scenario of GDP in india
 To know about the factors which affect the GDP

RESEARCH METHODOLOGY

The researcher used the doctrinal research in his study. The researcher collected various
information from the secondary data. The information has been collected from various sources
such as, journals, magazines and websitesw.
INTRODUCTION
Gross domestic product, total market value of the goods and services produced by a country’s
economy during a specified period of time. It includes all final goods and services—that is, those
that are produced by the economic agents located in that country regardless of their ownership
and that are not resold in any form. It is used throughout the world as the main measure of output
and economic activity.

When an economy experiences several consecutive quarters of positive GDP growth, it is

considered to be in an expansion (also called economic boom). Conversely, when it experiences
two or more consecutive quarters of negative GDP growth, the economy is generally considered
to be in a recession (also called economic bust)

PRESENT SCENARIO

The World Bank slashed its economic growth forecast for India to 6% for the current fiscal from
its April projection of 7.5%, citing a broad-based and severe cyclical slowdown.
Growth is expected to gradually recover to 6.9% in 2020-21 and to 7.2% the following year. 1
The World Bank in its analysis observed that the remarkable weakness of Indian economic
activity during the first half of 2019 is largely driven by external and cyclical factors. The Indian
economy has been plagued by several challenges. Some of these include Non-Banking Financial
Corporations running into trouble in 2018, hurting lending services to residents of smaller Indian
cities seeking credit to buy homes and vehicles. This is also one of the reasons for the slowdown
in the automobile sector. India contributes 3.36% of total world's GDP in exchange rate basis.
India shares 17.5 percent of the total world population and 2.4 percent of the world surface area.
This projection would make India as 5th largest economy of the world.

1
http://indiabudget.nic.in/
What Is GDP?

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods
and services produced within a country's borders in a specific time period. As a broad measure of
overall domestic production, it functions as a comprehensive scorecard of the country’s
economic health.

Though GDP is usually calculated on an annual basis, it can be calculated on quaterly  basis as
well. In the United States, for example, the government releases annulized GDP estimate for
each quarter and also for an entire year. Most of the individual data sets will also be given in real
terms, meaning that the data is adjusted for price changes, and is, therefore, net of inflation.

Calculating GDP

GDP can be determined via three primary methods. All, when correctly calculated, should yield
the same figure. These three approaches are often termed the expenditure approach, the output
(or production) approach, and the income approach.

GDP Formula Based on Spending

The expenditure approach, also known as spending approach calculates the spending by the
different groups that participate in the economy. This approach can be calculated using the
following formula: 

GDP = C + G + I + NX ,or (consumption + government spending + investment + net exports).

All these activities contribute to the GDP of a country.2

2
https://www.finmin.nic.in/the_ministry/dept_expenditure/index.html
GDP Based on Production

The production approach is something like the reverse of the expenditure approach. Instead of
measuring input costs that feed economic activity, the production approach estimates the total
value of economic output and deducts costs of intermediate goods that are consumed in the
process, like those of materials and services. The expenditure approach projects forward from
costs; the production approach looks backward from the vantage of a state of completed
economic activity.

GDP Based on Income

Considering that the other side of the spending coin is income, and since your expense is
somebody else’s income, another approach to calculating GDP, something of an intermediary
between the two other approaches, is the income approach. Income earned by all the factors of
production in an economy includes the wages paid to labor, the rent earned by land, the return on
capital in the form of interest, as well as corporate profits.

TYPES OF GDP

Real GDP

This is the calculation of GDP using the previous year’s prices as the base price. This makes a
Real GDP calculation suitable for tracking economic growth of a country. This method also
caters for inflation, therefore, it has accuracy compared to other types.3

Nominal GDP

This is the total value of goods and services produced at the current time. This method does not,
however, take into account the effect of inflation on GDP calculation.4

3
https://www.finmin.nic.in/the_ministry/dept_expenditure/index.html

4
https://www.finmin.nic.in/the_ministry/dept_expenditure/index.html
FACTORS THAT AFFECT THE GDP OF INDIA 

Natural Resources

The discovery of more natural resources like oil, or mineral deposits may boost economic growth
as this shifts or increases the country’s Production Possibility Curve. Other resources include
land, water, forests and natural gas.
Realistically, it is difficult, if not impossible, to increase the number of natural resources in a
country. Countries must take care to balance the supply and demand for scarce natural resources
to avoid depleting them. Improved land management may improve the quality of land and
contribute to economic growth.5

Physical Capital or Infrastructure

Increased investment in physical capital, such as factories, machinery, and roads, will lower the
cost of economic activity. Better factories and machinery are more productive than physical
labor. This higher productivity can increase output. For example, having a robust highway
system can reduce inefficiencies in moving raw materials or goods across the country, which can
increase its GDP.

 Population or Labor

A growing population means there is an increase in the availability of workers or employees,

which means a higher workforce. One downside of having a large population is that it could lead
to high unemployment.

Human Capital

An increase in investment in human capital can improve the quality of the labor force. This
increase in quality would result in an improvement of skills, abilities, and training. A skilled
labor force has a significant effect on growth since skilled workers are more productive. For

5
http://business.gov.in/outerwin.php?id=http://indiabudget.nic.in/previouses.htm
example, investing in skilled students would increase the availability of workers for higher-
skilled jobs that pay more than investing in blue collar jobs.

Foreign Investment

It should be noted that foreign capital does not flow into the developing countries in the form of
aid alone (that is, loans at concessional rates of interest) but also through direct investment by
foreign companies. Foreign direct investment (FDI) is an important way for a country to
accelerate its economic growth. Though the foreign companies send back profits earned, their
investments in factories increase the rate of capital accumulation in the developing countries
leading to a higher rate of economic growth and higher productivity of labour. Besides, foreign
direct investment enables the developing countries to learn the new advanced technologies
developed and used in the rich developed countries

Technology

Another influential factor is the improvement of technology. The technology could increase
productivity with the same levels of labor, thus accelerating growth and development. This
increment means factories can be more productive at lower costs. Technology is most likely to
lead to sustained long-run growth.

Law

An institutional framework which regulates economic activity such as rules and laws. There is no
specific set of institutions that promote growth.

Poor health and low levels of education

People who don’t have access to healthcare or education have lower levels of productivity. This
lack of access means the labor force is not as productive as it could be. Therefore, the economy
does not reach the productivity it could otherwise.
Lack of necessary infrastructure

Developing nations often suffer from inadequate infrastructures such as roads, schools, and
hospitals. This lack of infrastructure makes transportation more expensive and slows the overall
efficiency of the country.

Leisure Preference

Due to technological progress, average productivity of resources (including manpower) has

gone up in most industrialised countries. This has enabled workers to enjoy more leisure. The
increased leisure available to the workers allows them to enjoy more recreation in the form of
weekend terms and pursuing cultural activities. Their activities are, no doubt, welfare- enhancing
in nature. But their extra hours of leisure are not priced in markets and, therefore, do not get
reflected in GDP.

Non-Marketed Activities

All economically important activities are not bought and sold in market. With a few exceptions,
such as government services, non-marketed economic activities are omitted from GDP. An
example is unpaid housekeeping services. Another example is voluntary services of NGOs such
as volunteer free service and education services offered free of cost to poor children in slums.
Such unpaid and un-priced services, no doubt, increase social welfare. But they are omitted from
GDP, because it is difficult to estimate their market values.6

Quality of Life

Various factors make a particular town or city an attractive place to live. Some of these desirable
features get reflected in GDP: spacious, well-constructed homes, good star hotels and
restaurants, a variety of entertaining and high-quality medical services. However, other
indicators of good life are not sold in markets and so may be omitted from GDP. Examples

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https://www.britannica.com/topic/gross-domestic-product
include a low crime rate, minimum traffic congestion, active civic organizations (like municipal
corporations) and open space.

CONCLUSION
The researcher in this research came to know about the present GDP rate and present economic
condition of a country. The decrease in the GDP of india is due to various external and cyclical
factors. Various steps have been taken by the government to increase the GDP growth rate in
india.

To increase the GDP, there is a need of improved and effective government to take adequate
steps for increasing the GDP growth rate of a country. There is a need to liberalize the financial
market. The trade with the neighbours must be increased. There must have an improved
infrastructure.

More focus must be laid down at the industrial sector. There must be an increased agricultural
productivity as agriculture sector plays an important role in determining the GDP of our country.
With an improved environment quality there can be increase in the GDP of a country. With
proper and up to date technology there can be an increase in the GDP of a country.
BIBLIOGRAPHY

 http://indiabudget.nic.in/

 https://www.finmin.nic.in/the_ministry/dept_expenditure/index.html

 http://business.gov.in/outerwin.php?id=http://indiabudget.nic.in/previouses.htm

 https://www.britannica.com/topic/gross-domestic-product