How to calculate GDP (PPP) and GDP nominal?

27 Apr 2011 Share on:

Take a basket of commodities (like 1 kg sugar,wheat,veggies and cloths etc).

Now find out how much money do you need to buy everything from that basket?

For India suppose the bill is 1700 Rs.

Go to America and buy same items from their local market, the bill is 100$

So 100$=1700 Rs. => 1$=17 Rs.

So, PPP exchange rate is 17 Rs. per 1 $

To calculate GDP (PPP)

GDP (in Rupees) / PPP exchange rate for Rupees

=100/17

=5 $

India's GDP (PPP)= 5$

To calculate nominal GDP in $. 

Just convert the Rupee into dollar at official exchange rate.1$=50 Rs.

India's GDP (in Rupees)/official exchange rate

=100/50

=2$

So India's GDP (nominal) is 2$.

#As described by Mrunal