Karandikars & Associates

GDP Current Prices

Under the production approach, Gross Domestic Product (GDP) is a measure of production activity. The procedure adopted for compilation of GDP is to measure the production activity in each producer unit by means of what is called, Gross Value added (GVA) by the unit, where GVA is the value of output less the value of input used up in the process of production, which we saw in the section on Output / Intermediate Consumption / GVA

Here GDP is defined as the sum of GVA of all resident producer units of the economy during the reference period. If the output is measured at factor cost without adding any tax and subtracting any subsidy, then the GDP thus obtained is called GDP at factor cost

If output is valued by including tax less subsidy on production but not on products, we obtain GDP at basic price

To the GDP at basic price if we add taxes less subsidies on products including those relating to import/export we get GDP at market price

We would like our readers to note the difference between (tax less subsidy) on production and the same on products. To reiterate, when (taxes less subsidies) on production are added to GDP at factor cost, we get GDP at basic prices, while when (taxes less subsidies) on products are added to GDP at basic prices, we get GDP at market price

Having noted this difference between GDP measures at factor cost, basic price and market price, we now move to understand the difference between GDP measures at current price and constant price

GDP measured at today's price, or current price is called GDP at current prices or nominal GDP. If the GDP measured using prices that prevailed in a particular year called base year, it is known as GDP at constant prices or real GDP

Table below captures trend in GDP at Current Prices

For 2023-24, GVA at Basic Prices was Rs 274.1 lakh crore (same as Rs. trillion). Taxes on Product including import duties were Rs. 33.5 trillion while subsidies amounted to Rs 6.4 trillion, giving GDP at Current Price of Rs. 301.2 trillion (274.1+33.5-6.4)

For 2011-12, GDP at Current Prices was Rs 87.4 trillion. As we will see in the section on GDP at Constant Prices, base year of 2011-12 is used. Hence for this year GDP at Current Prices and GDP at Constant Prices is same