Indian GDP is calculated by Expenditure method which is as follows:
GDP = consumption + investment + (government spending) + (exports-imports) and the formula is GDP = C + I + G + (X-M)
Where:
- C - stands for consumption which includes personal expenditures pertaining to food, households, medical expenses, rent, etc
- I - stands for business investment as capital which includes construction of a new mine, purchase of machinery and equipment for a factory, purchase of software, expenditure on new houses, buying goods and services but investments on financial products is not included as it falls under savings
- G- stands for the total government expenditures on final goods and services which includes investment expenditure by the government, purchase of weapons for the military, and salaries of public servants
- X - stands for gross exports which includes all goods and services produced for overseas consumption
- M - stands for gross imports which includes any goods or services imported for consumption and it should be deducted to prevent from calculating foreign supply as domestic supply
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