What is the GDP?
Gross Domestic Product (GDP) represents the total monetary value of all final goods and services produced and sold on the market. Within a country during a specific period of time which is generally a year.
THE G IN GDP is GROSS that indicates that products are counted regardless of their subsequent use. A product’s final “sales receipt” will be added to the total GDP figure.
THE D IN GDP is DOMESTIC that indicates that the inclusion criterion is geographical, goods and services counted are those produced within the country’s border.
THE P IN GDP is PRODUCT that indicates for production, or economic output, of final goods and services sold on the market.
How to calculate GDP
There are three ways to calculate GDP
PRODUCTION APPROACH – The sum of the value-added at each stage of production.
EXPENDITURE APPROACH- The sum of purchases made by final users.
INCOME APPROACH- The sum of the incomes generated by production subjects.
CHANGE IN GDP OF INDIA IN THE YEAR 2020
Due to the lockdown imposed in India for coronavirus from March and has gradually increased. India has become the third worst-hit country by the virus after the USA and Brazil. For the lockdown, the economic condition of the country fell down. The Indian economy shrank by 23.9%. It is the biggest contraction on record for India.
Construction (-50.3%), hotels and transportation (-47%) and manufacturing (-39.3%) has a never seen downfall. Private spending shrank 26.7%, inventories fell 20.8%, exports went down 19.8% and imports sank 40.4%. In contrast, government consumption increases by 16.4% because of the various relief funds.
EFFECTS ON CONSTRUCTION INDUSTRY
“ The growth of GDP has declined largely due to the low growth in the manufacturing and construction sector,” Minister of state for statistics and programme implementation said by Rao Inderjit Singh.
The building construction industry in India is expected to record a contract of 7.5% in 2020. Due to the pandemic, the construction industry had been showing signs of weakness. The residential market struggling due to rising unemployment. The quarterly value adds data shows growth in the ‘financial, real estate & professional services’ decelerating to 2.4% in Q1 2020.
Reduced labour at construction sites may lead to the idling of the plant and machinery deployed for construction work. These machines have a fixed hiring cost, which is charged to any project regardless of the machine utilization.
How to calculate GDP
THERE ARE SOME RECCOMDATIONS TO THE CONSTRUCTION INDUSTRY IN THIS JUNCTURE
Consider the release of contractor retention and performance bank guarantee, as applicable depending on the stage of the project.
Consider providing benefits in the form of lower GST than the prevailing.
Waiver of minimum electricity and other charges imposed during the closure of the project sites.
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