In this blog we shall discuss how GDP is calculated and why
GDP growth is a myth.
GDP = Production * Price per unit
Let us suppose a country A produces 5000 tractors per year and nothing else. Let us suppose it takes 25000 rupees to produce one tractor.
GDP = 5000 * 25000
Now, the next year the tractor price has increased to 26000 rupees
GDP for the next year = 5000 * 26000
The GDP is said to be grown even though in actuality the production is still the same. So, one shouldn’t interpret GDP growth or GDP contribution growth as an indicator of actual growth in a industry.