Many factors affect GDP. The main focus is on two.

The first factor that affects GDP is from the demand side and the second factor is from the supply side.

INDIA AT A GLANCE The Gross Domestic Product in the country like India is experiencing a faster rate of growth in the recent years. With regards to the composition of GDP, the percentage shares of various sectors have largely changed. The percentage share of the agriculture in the total GDP has declined, on the contrary the percentage share of services in the GDP is rising faster. The percentage share of various sectors of Indias Economy in the total GDP in the year 1990-91 is as follows.

In the year 2005-06, the percentage share of services in the total GDP increased to 54 percent. On the other hand percentage share of agriculture in the GDP declined to 20 percent in 2005-06 from 32 percent in the year 1990-91. The contribution of Indias agriculture to the total GDP of the country is experiencing a declining trend. On the contrary the percentage share of services sector to the total GDP is rising at a faster pace.

Keeping in view the poor performance of the agriculture in Indias Economy, the coming budget 2007-08 is expected to come with more investments on agriculture. Though the services sector in India has huge contribution to the countrys economy, still it has failed to some extent in attracting more investments to the sector.

More over the coming budget 2007-08 is expected to draw more attention on consumption led growth, which is needed for strengthening and sustaining the economic growth of the country

A nations growth domestic product (GDP) represents the economic market values for the goods and services that businesses produce. GDP growth occurs when a country allows its private sector to operate in a mostly unregulated manner. Specific factors that affect GDP growth include widely available economic resources at cheap prices, high labor and wage output, and strong consumer and business confidence. In many cases, these factors all occur differently in each nation; other times, different

factors can play a role. Therefore, growth is not something every nation experiences at the same time or through the same factors.

Economic resources are the physical items individuals and businesses need in order to produce goods and services. These items must be readily available within the country or through trade. A price point that is inexpensive and allows for the maximization of the resources is often necessary to experience solid GDP growth. Competition to obtain these resources can also help ensure GDP growth. As companies seek to obtain more resources than others, growth occurs due to higher supply in the market.

High wages and productivity output are also necessary for a nation to experience GDP growth. High wages indicate a company is able to secure enough profits in order to pay employees well for their labor. These wages then enter the market as individuals purchase more goods, driving up demand and increasing supply. The wages affect productivity as companies seek methods that allow for inexpensive production to increase supply output. The result is inexpensive goods that employees can help produce in large quantities.

Consumer and business confidence represent the belief these parties have in the current economy. In most free-market economies, consumers can make up a large portion of the GDP growth. High consumer confidence indicates buyers who are willing to spend money on various economic goods. The same goes for business confidence. Confident businesses look to increase output and meet potentially higher consumer demand for goods and services.

According to investopedia The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.

Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income

approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total.

The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports.

As one can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It's not hard to understand why: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.