But without knowing the nominal GDP for the current year, the government cannot project what the nominal GDP is likely to be in the next financial year. Here’s what former FM P Chidambaram has to say on Union Budget 2020So the first thing to understand is the importance of nominal GDP. It is the nominal GDP growth that an FM targets, not the real GDP growth. The real GDP growth is derived by subtracting the inflation rate (that is the rate at which prices are increasing in an economy) from the nominal GDP growth rate. By doing this, real GDP growth provides a better picture of economic growth between countries that may have differing levels of inflation.

Source: Indian Express January 27, 2020 09:45 UTC