Tuesday, February 27, 2007

India Budget 2007: The GDP Angle

After some efforts, I'm beginning to understand the Union Budget jargon. One of the oft repeated term used is GDP. For example all the growth is measured in terms of GDP growth. Fiscal deficit targets are measured in percentage terms of GDP (target for 2006-07 was 3.8%) Gross Domestic Product, we all know. But I'll probe a bit further to understand the budget better.

GDP is the monetary value of all the finished goods and services produced within a country in a specific time period. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. In a simple formula representation, GDP = Consumption+ Government Expenditure + Investments+ Net Exports. But it does not include Black money and that is why the existence of a parallel economy!

Now I was trying to relate my newly gained knowledge as a layman and I found it similar to the game of cricket. The game has its components of batting, fielding, bowling and a certain attitude. Likewise the GDP has its components as mentioned above and is measured by relating to various sectors like Industry, Infrastructure, Services and Agriculture.

So while we are famed for our batting (services), have a positive attitude (Industry) and are improving our bowling (Infrastructure), fielding (Agriculture) is an area of concern. There is a deceleration of agricultural growth in our country and while the other sectors are growing faster, agriculture with 2.7% growth drags us down.

I would expect the FM to boost the agriculture sector (Fielding) and allied sectors like horticulture, food processing, fisheries, etc (Running, diving, running between the wickets). I would also expect him to bolster the bowling attack ( I mean the Infrastructure sector) where we have much scope of improvement.

Not to forget on building on our strengths too!

Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.
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