Real GDP

Real GDP

Real GDP refers to the gross domestic income at constant prices. Constant prices refer to the prices prevailing in the market in a past year called the base year. A base year is a normal year in the past free from major economic and social disturbances so that price level remains stable. Domestic income at constant prices (real GDP) refers to the money value of all final goals and services produced during a given year and measured according to the prices of the base year. If G1 is the output of 2011-2, P0 is the price of G1 in 2004-05 (base year), then gross domestic income at constant prices would be P0G1.

To arrive at the domestic income at constant prices (real GDP) the following formula is followed.

GDP at constant prices for 2011-12

=   GDP at current Prices 

Prices index no, of the current year /Prices index no. of the base year