GDP Ratios

1 Tax to GDP Ratio :

  • Taxes are related to economic activity.
  • Tax revenues fall drastically during the period of the global financial crisis

Rising Tax/GDP ratio indicates the growth in the Economic activity

  • Example : GDP of a nation is $10 Trillion
  • Tax revenue is $2 Trillion
  • Hence Tax GDP Ratio is 2/10 = 20%

2 Debt to GDP Ratio : Indicates the economy that produces the and sells goods and services sufficient to payback the debts without incurring the further debts

  • Debt: In crores of rupees (unit of currency)
  • GDP per annum time units of years
  • This indicates the number of years required to pay off the debt * if all of the GDP is devoted to the Debt payment
  • 90% refers to the debt that can be cleared from the 90% of year’s GDP to pay off

3 Market Cap to GDP Ratio

  • This is the new ratio as per the Warren Buffet’s (2001 address) Value Indicator
  • This is considered as the single best measure where the valuations stand @ at any given point of time.
  • Also known as Buffet Indicator
  • Overall market is undervalued or Overvalued