For UPSC aspirants, delving into the intricacies of the Indian economy, particularly the concept of National Income, is crucial for comprehensive preparation. National Income serves as a foundational pillar in understanding the economic landscape of a nation, encompassing the total value of goods and services produced within its borders over a specified period. To navigate through this complex terrain, UPSC NCERT Notes on Indian Economy provide a structured and insightful approach. These notes meticulously curated from the National Council of Educational Research and Training (NCERT) textbooks offer aspirants a clear understanding of key concepts, methodologies, and challenges pertaining to National Income measurement in India. By incorporating these notes into their study regimen, UPSC candidates can gain a solid grasp of the fundamentals, empowering them to tackle related questions with confidence in the competitive examination.
Definition:
National Income is the total net earnings from the production of goods and services in a country over a specified period, typically one year. It comprises wages, salaries, rent, profits, and interest. The market value of final goods and services produced in an economy during an accounting year is referred to as national income.
Calculation:
- National Income = C + I + G + (X – M)
- Where,
- C = Total Consumption Expenditure
- I = Total Investment Expenditure
- G = Total Government Expenditure
- X = Exports
- M = Imports
Considerations:
- National income is regarded as Net National Product (NN) at factor cost.
- Measurement methods include Gross National Product (GNP), Gross Domestic Product (GDP), Gross National Income (GNI), Net National Product (NNP), Net National Income (NNI), and Per-Capita Income (PCI).
- National Income measures the flow of goods and services in the economy rather than collecting them as stock.
- National income statistics in India follow the fiscal year from April 1st to March 31st, managed by the National Statistics Office India.
Evolution of the National Income Accounting System
- The genesis of national income estimation traces back to 17th-century England, where Sir William Petty and Viol Gilbert laid the foundation.
- In his book “Political Arithmetic,” Sir William Petty defined national income as the total value produced by workers in a year. Post-World War II, Simon Kuznets pioneered the development of the National Income Accounting System, earning the Nobel Prize in 1971.
- Subsequently, global institutions like the World Bank, the International Monetary Fund, and the United Nations provided structure to this system.
National Income Accounting
- National income accounting serves as a double-entry system utilized by governments to measure a country’s economic performance effectively.
- It assesses economic performance and the monetary flow within an economy.
- The significance lies in facilitating techniques and procedures for the aggregate-level measurement of output and income.
- The process, based on double-entry business accounting principles, summarizes a country’s economic performance by measuring key national income aggregates.
National Income and Related Aggregates
- Various national income aggregates, estimated either at factor cost or market price, include:
1. Factor Cost:
- Refers to the cost of factors of production, such as rent, interest, wages, and profit.
- Excludes indirect taxes and includes subsidies.
- Factor costs encompass all production-related expenses incurred by producing firms or industries.
2. Basic Price:
- The amount receivable by the producer for a unit of a good or service produced, excluding transport costs invoiced separately.
- Basic price equals factor cost plus production taxes minus production subsidies.
3. Market Price:
- The price customers pay, including indirect taxes and subsidies.
- National Income at factor cost is derived by deducting indirect taxes and adding subsidies to the market price.
Intermediate Consumption of Goods:
- Measures the value of goods and services consumed as inputs in the production process.
- Excludes consumption of fixed assets recorded as consumption of fixed capital.
Concepts of National Income
- Continuous Flow: National income is viewed as a continuous flow of goods and services produced over time, not as a stock available at any specific point.
- Inclusion Criteria: The concept encompasses the market price of all goods and services, with each item’s price counted only once to avoid double counting. Only the value of final goods and services is considered.
The Temporal Aspect of National Income
- The concept of national income is bound by a fixed period, typically one year. Two fundamental concepts, namely national product and domestic product, serve as the foundation for various other forms and interpretations within the realm of national income calculation.
Gross Domestic Product (GDP)
- Gross Domestic Product (GDP) represents the monetary value of all final goods and services produced within a country’s borders during a specific time period. The National Statistical Office (NSO) is responsible for estimating GDP.
GDP Equation:
GDP=C+I+G+NX
Where,
- C = Consumption
- I = Investment
- G = Government Expenditure
- NX = Net Export
GDP at Market Price (GDP MP)
- GDP at market price refers to the total value of all goods and services produced within the geographical boundaries of the country during a year. It considers the actual transacted price, including indirect taxes (e.g., excise duty, VAT, service tax, customs duty) and government subsidies. This approach has led to a consistent increase in GDP over the past decades.
GDP MP Equation:
GDP MP =GDP PC +(IndirectTaxes−Subsidies)
GDP at Factor Cost (GDP FC)
- GDP at factor cost represents the total value of goods and commodities produced in a year within a country by all production units at the factory level.
- Understanding these concepts provides a comprehensive framework for assessing a country’s economic performance over a specific timeframe.
Government Grants and Subsidies in GDP Calculation
- In the calculation of GDP, government grants and subsidies are considered, whereas indirect taxes are excluded from the equation.
- GDP o =GDPm −(IndirectTaxes+Subsidies)
GDP at Factor Cost (FC) and Market Price (MP)
- Two essential variants of GDP, namely GDP at Factor Cost (GDP_FC) and GDP at Market Price (GDP_MP), are calculated as follows:
- GDP MP =GNP MP −(X−M)
- GDP FC =GNP FC −(X−M)
- Where
- X represents exports and
- M represents imports of a country.
Economic Growth Rate
- The annual percentage change in GDP is termed the economic growth rate, providing a quantitative measure of the economy’s growth over time.
Gross Domestic Savings
- Gross domestic savings encompass savings from the household sector, private co-operative sector, and the public sector, including households, non-profit institutions (colleges, hospitals, etc.), and non-cooperative business units.
Methods of GDP Calculation
- Various methods are employed to calculate GDP, and one such approach is the Production Approach, also known as the Value Added Approach (VAP). This method assesses the value contributed at each stage of production, obtaining the value added by deducting the cost of goods and services used in the production process. The cost of these goods and services is referred to as intermediate consumption or intermediate inputs.
Significance of Value Added Method in GDP Calculation
- The Value Added Approach is valuable in addressing the counting of goods with imported inputs in GDP. It ensures that only the value of newly produced items is added, avoiding the problem of double counting, as the value of intermediate goods is not counted in this method.
Income Approach to GDP Calculation
- The income approach to calculating Gross Domestic Product (GDP) asserts that all economic expenditures should equate to the total income generated through the production of goods and services. This method measures GDP by aggregating incomes that firms pay households for factors of production, including wages for labor, interest for capital, rent for land, and profits for entrepreneurship.
GDP=Total National Income+Sales Taxes+Depreciation+Net Foreign Factor Income
Expenditure Approach to GDP Calculation
- The expenditure approach, the most widely used GDP formula, is based on the money spent by various economic participants. This method considers consumption, investments, net exports, and government expenditure to calculate a nation’s annual GDP.
GDP(Y)=C+I+G+(X−M)
Real Gross Domestic Product (Real GDP)
Real GDP:
- Real Gross Domestic Product (Real GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year. It is expressed in base-year prices and facilitates meaningful comparisons over time.
GDP Deflator×100 RealGDP= GDP Deflator NominalGDP ×100
Nominal GDP:
- Nominal GDP assesses economic production but includes current prices.
- It considers factors like inflation, price changes, changing interest rates, and money supply during GDP determination.
Relevance of GDP
- Gross Domestic Product (GDP) is crucial as it provides insights into the economy’s size and performance. The growth rate of real GDP is a key indicator of economic well-being, with an increase signaling a thriving economy.
India’s Base Year Change for GDP Computation
- Selecting a base year marks the initial phase in computing real GDP.
- Indian statisticians, as part of revised GDP calculations, transitioned from the 2004-2005 base year to 2011-2012.
- Such changes are routine, occurring approximately every five years.
- The government has suggested 2017-2018 as the new base year for GDP and Index of Industrial Production (IIP), and 2018 for the Consumer Price Index (CPI).
- This shift includes 6 sectors and 14 sub-sectors in the estimation of national income, a refinement from the previous 13 sub-sectors.
Gross National Product (GNP)
- GNP represents the market value of all goods and services produced in a country within a year by its citizens and property.
- It can be expressed as GNP = GDP + (X – M), where X denotes money flowing from foreign countries, and M signifies money flowing to foreign countries.
Gross National Product at Market Price
- GNP at market price encapsulates the final monetary value of goods and services produced by a country’s citizens in a specified period, typically a year.
- The distinction from GDP lies in subtracting the income earned by foreigners within the country (M) and adding the income earned by Indians abroad (X). In a closed economy, where [X-M] = 0, GNP equals GDP.
Income from Abroad in GNP Calculation
- Income from abroad is a crucial component in GNP calculation, encompassing transactions made by Indian citizens abroad and vice versa. This includes income received from private remittances, interest on foreign debt, and foreign aid.
Gross National Product at Factor Cost
- Under the factor cost, GNP includes income received from land, capital, labor, and enterprise.
- Deducting net indirect taxes from GNP at market prices yields GNP at factor cost.
- This calculation considers subsidies and indirect taxes, with the net indirect tax obtained by subtracting the subsidy from the indirect tax.
| Difference Between GDP and GNP GDP encompasses all goods and services produced in a country, regardless of the producer’s nationality. In contrast, GNP includes production by nationals abroad but excludes production by foreigners within the country. |
Net National Product (NNP)
- NNP represents the value of GNP with the deduction of plant and machinery depreciation.
- It undergoes annual scrutiny as a method to gauge national income.
National Income (NI)
- NI is derived from NNP by subtracting indirect taxes and adding subsidies, denoted as
- NI = NNP – Indirect taxes + Subsidies.
- Net Domestic Product at Market Price
- Net Domestic Product (NDP) is obtained by deducting the depreciation of machinery and capital from Gross Domestic Product (GDP).
- NDPMP is calculated as GDPMP – Depreciation, offering insights into economic losses due to depreciation.
Net Domestic Product at Factor Cost
- Net Domestic Product at factor cost (NDPpc) is derived by subtracting net indirect taxes from NDP at market price. It reflects the sum total of factor income within the domestic territory during one accounting year, expressed as NDPpc = NDP – Net Indirect Taxes.
Real National Income (RNI)
- RNI is the inflation-adjusted value of National Income, computed using a reference point (base year).
- The formula for RNI is RNI = NNP at current prices × 100/Price Index.
Per-Capita Income (PCI)
- PCI gauges the earnings per person in a specific area, calculated as Per-Capita Income = National Income / Population of the Country.
| Real Per Capita Income (RPCI) RPCI, a measure of people’s well-being, is obtained by dividing national income at constant prices by the total population of the country: RPCI = National Income at Constant Price × 100 / Total Population. |
Personal Income (PI)
- PI is the income of a country’s residents, considering transfer payments to individuals, minus social security contributions, corporate tax, and undistributed profits: Personal Income = National Income + Transfer payments – Social security contributions – Corporate tax – Undistributed profits.
| Disposable Income (DI) DI is the income individuals have at their disposal after settling direct tax liabilities: Disposable Income = Personal Income – Direct taxes (e.g., Income tax). |
Other Concepts Related to National Income
- Net National Disposable Income: Calculated as Net Domestic Income + Net factor income from abroad + Net current transfers from the rest of the world.
- Gross National Disposable Income: Computed as Net National Disposable Income + Current Replacement Cost.
Personal Disposable Income
- Personal disposable income is derived by subtracting direct taxes and miscellaneous fees and fines paid by households from personal income.
Factor Income Received by the Private Sector
- Factor income received by the private sector from Net Domestic Product is calculated by subtracting government departmental enterprises’ wealth and income from entrepreneurship savings of non-departmental enterprises from Net Domestic Product at factor cost.
Green Economy
- The green economy focuses on addressing environmental risks and ecological scarcity while aiming for sustainable development without degrading the environment.
Green GDP
- Green GDP involves creating an economic development index that accounts for environmental consequences.
- The Green Index measures the environmental impact of economic development, considering factors like damage to biodiversity.
- It is calculated by subtracting the monetary value of net natural capital consumption from Gross Domestic Product.
Green GNP
- Green GNP represents the maximum per capita production achievable while keeping the country’s natural resources constant.
- Introduced in 1995, it factors in gross addition and natural (environmental) depletion.
| Green National Income Green national income, a part of green accounting, subtracts the decay costs of nature-provided resources used in enhancing national products from national income. |
| Gross Environmental Product Gross Environmental Product is an index of economic development with environmental consequences, revealing the impact of a country’s actions on biodiversity and the environment. |
Potential GDP
- Potential GDP anticipates future higher levels of economic production.
- It is linked to the actual money value of goods and services produced when factors of production are fully employed.
- Determinants include political stability, technological progress, a competitive market, labor availability, physical capital usage, skill ability, distribution of labor, and proper utilization of human resources.
Gross Value Added (GVA)
- In 2015, India transitioned its national accounts compilation to conform with the United Nations’ System of National Accounts (SNA) of 2008.
- GVA is defined as the value of output minus the value of intermediate consumption, measuring the contribution to growth made by an individual producer, industry, or sector.
- It represents the rupee value of goods and services produced in an economy after deducting the cost of inputs and raw materials. GVA = GDP + Subsidies on Products – Taxes on Products.
- The new methodology shifted from measuring GVA at factor cost to GVA at basic prices as the primary measure of economic output.
GVA Calculation Methods
- GVA at basic prices incorporates production taxes and excludes production subsidies.
- On the other hand, GVA at factor cost includes no taxes and excludes no subsidies.
- The shift from the base year of 2004-05 to 2011-12 has been implemented.
GVA vs. GDP
- GVA represents the value added to a product, enhancing various aspects, while GDP is the total quantity of products produced in a country.
- GDP includes private consumption, gross investment, government investment, government spending, and net foreign trade (exports minus imports).
| Hindu Growth Rate Coined by economist Professor Rajkrishna in 1978, the Hindu Growth Rate refers to the slow growth of the Indian economy under socialistic economic policies. It stagnated around 3.5% from the 1950s to the 1980s, with per capita income growth averaging 1.3%. |
Calculating National Income
- Simon Kuznets identified three methods to calculate national income:
- Product Method: Obtains the net value of final goods and services produced in a country, known as Total Final Product (TFP).
- Income Method: Gathers the total net income earned by individuals in various sectors, including rent, wages, interest, and profit.
- Consumption Method: Also called the Expenditure Method, adds total consumption and total saving to calculate National Income (NI).
Problems in Calculating National Income
- Black Money: Illegal activities and unreported income contribute to tax evasion and corruption, remaining outside GDP estimates.
- Non-Monetisation: Informal transactions in the rural economy, known as the Non-Monetised Economy, keep GDP estimates lower than the actual.
- Growing Service Sector: The service sector, including BPO, legal consultancy, health, and financial services, lacks accurate reporting, leading to an underestimation of national income.
- Double Counting: Despite corrective measures, eliminating double counting remains challenging, posing a hurdle to accurate GDP estimates.
| Estimation of National Income in India Dadabhai Naoroji’s 1867-1868 attempt estimated Per-Capita Income to be 20. Professor VKRV Rao’s 1931-1932 scientific method was unsatisfactory. The National Income Committee, led by Professor PC Mahalanobis in 1949, made the first official attempt. The National Income Committee Report (1954) stated India’s National Income as 8710 crores and Per-Capita Income as 225 in 1948-1949. The National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation is responsible for estimating and publishing National Income in India. |
Limitations in Measuring National Incomes
- When measuring National Income, certain limitations, challenges, and problems need to be considered:
- Domestic Economic Performance vs. Social Welfare: National income measures domestic economic performance, not social welfare, despite the expectation of a strong positive correlation.
- Understatement of Social Welfare: National income understates social welfare as it doesn’t account for non-market transactions like home-makers services and do-it-yourself projects. It also fails to measure changes in leisure, work satisfaction, and product quality.
- Environmental Changes: National income does not accurately reflect changes in the environment. While activities like oil spill clean-up are measured as positive output, increased pollution is not measured as negative.
- Per-capita income as a Better Measure: Per-capita income is considered a more meaningful measure of living standards than total national income. The problem of double counting can be avoided using the value-added approach.
- Depreciation Estimation Issues: Problems arise in estimating depreciation accurately.
Net National Income (NNI)
- Definition: NNI is defined as Gross National Income (GNI) minus the depreciation of fixed capital assets through wear and tear and obsolescence.
- Net of Consumption of Fixed Capital (CFC): It is ‘net’ of Consumption of Fixed Capital (CFC) or depreciation, representing the decline in the value of fixed assets used in production.
- Comparison Between Countries: The difference between Net National Income and Gross National Income lies in consumption of fixed capital, making NNI a comparable metric between countries.
- Formula for NNI: NNI = C + I + G + X + NFFI – IT – D
Where:
C = Consumption
I = Investment
G = Government spending
X = Net exports
N = Net Foreign Factor Income (NFFI)
D = Depreciation
IT = Indirect Taxes
Indian Organizations Related to National Income Accounts
- Several key organizations play a role in the calculation of national income in India:
Ministry of Statistics and Programme Implementation:
- Responsible for coverage and quality aspects of statistics released.
- Conducts surveys based on scientific sampling methods.
National Statistical Office (NSO):
- Formed by merging the Central Statistical Office (CSO) and National Sample Survey Office (NSSO).
- Conducts large-scale sample surveys in various fields across India.
- Divisions include Survey Design and Research Division (SDRD) and Field Operations Division (FOD).
- Data Processing Division (DPD): Headquartered in Kolkata with five additional Data Processing Centers, DPD oversees sample selection, software development, processing, validation, and tabulation of survey data.
- The Price and Wages in Rural India, collected through schedule 3.01 (R), undergo processing at DPC Giridih. Additionally, DPD handles data processing for the Periodic Labour Force Survey (PLFS).
- Industrial Statistics Wing (IS Wing), DPD, NSO, Kolkata: Responsible for sample selection, data processing, validation, and tabulation of Annual Survey of Industries (ASI) data collected through a dedicated web portal.
- Survey Coordination Division (SCD): Situated in New Delhi, SCD coordinates all NSO division activities, publishes the bi-annual journal “Sarvekshana,” and organizes National Seminars on results from various socio-economic surveys conducted by NSO.
Central Statistical Office (CSO):
- Established on May 2, 1951, CSO is a key wing of NSO, responsible for coordinating statistical activities, and evolving and maintaining statistical standards. Its tasks include compiling national accounts, conducting annual surveys of industries, economic censuses, and handling various social statistics.
National Sample Survey Office (NSSO):
- Founded in 1950, NSSO conducts large-scale sample surveys to meet the country’s data needs for estimating national income and other aggregates.
- NSSO undertakes fieldwork for the Annual Survey of Industries nationwide, excluding Jammu and Kashmir.
- It also conducts the All India household consumer expenditure survey, a primary data source on the living standards of the Indian population.
National Statistical Commission (NSC):
- Established on June 1, 2005, following Cabinet acceptance of the Rangarajan Commission’s recommendations in 2001.
- NSC, formed with effect from July 12, 2006, is tasked with evolving policies, priorities, and standards in statistical matters.
- The commission comprises a Chairperson and four members, each with specialization and experience in specific statistical fields.
Growth and Structure Trends in National Income
- The Real GDP (Gross Domestic Product) at constant (2011-2012) prices for the fiscal year 2022-2023 are currently projected to reach 236.65 lakh crore.
- The National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation, has recently unveiled revised GDP figures.
- According to the new series with a base year of 2011-2012, India’s GDP at constant prices is expected to exhibit an 8.68% growth for the fiscal year 2022-2023.
- The Per Capita Income in real terms (at 2011-2012 prices) for the year 2022-2023 is anticipated to reach 1,44,565, compared to 1,07,801 in the previous fiscal year 2021-2022.
- The Per Capita Income at current prices for the Fiscal Year (FY) 2022 is reported at 93,000, reflecting a significant decline attributed to the impact of the COVID-19 pandemic.
- As industrialization continues to expand, there is a noticeable improvement in the share of the industry and services sectors in the overall GDP composition.
- However, the transformation in India’s economic structure is gradual due to the slow growth rate in the manufacturing sector.
Prelims Facts
- The national income of a country for a given period is equal to the -Money value of final goods and services produced (IAS (Pre) 2013)
- What represents the gross national product at market price minus depreciation and indirect taxes plus subsidies? National income [IAS (Pre) 2001)
- The net national product at market price is the gross national product at market price-depreciation [RAS/RTS (Pre) 2021]
- One of the problems in calculating national income in India is the unorganized sector (BPSC (Pre) 2017)
- Who first estimated the national income in India? -Dadabhai Naoroji (UPPSC (Mains) 2013]
- Theoretically, if economic growth is conceptualized, which is not usually taken into consideration? -Growth in financial aid from World Bank [JPSC (Pre) 2013]
- Who was the Chairman of the National Income Committee appointed by the Government of India in 1949? PC Mahalanobis (UPPSC (Mains) 2015]
- Which is the correct base year for measuring national income in India? -2004 to 2005 [UP UDA/LDA (Pre) 2010
- In national income accounting, the year whose prices are being used to calculate the real GDP is known as the Base year [RAS/RTS (Pre) 2021, UPPSC (Pre) 2005
- Which economist, for the first time scientifically determined the national income in India? VK RV Rao [UPPSC (Pre) 2015]
- Who gave the view that ‘Planning in India should in future, pay more attention to the people than to commodities’?
- What is the vital change in the measurement of national income of India recently? Amartya Sen (UPPSC (Pre) 2008)
- Both the base year and calculation method have changed [UPPSC (Pre) 2010, RAS/RTS (Pre) 2013)
- If over a given period, both prices and monetary Income have been doubled, the real income will be Unchanged [UPPSC (Mains) 2004, UPPSC (Pre) 2016
UPSC NCERT Practice Questions
1. The national income of a country for a given period is equal to the IAS (Pre) 2013
(a) the total value of goods and services produced by the nationals.
(b) the sum of the total consumption and investment expenditure.
(c) the sum of personal income of all individuals.
(d) the money value of final goods and services produced.
2. The term ‘national income represents
(a) Gross National Product (GNP) at market prices minus depreciation.
(b) Gross National Product (GNP) at market prices minus depreciation plus net factor income from abroad.
(c) Gross National Product (GNP) at market prices minus depreciation and indirect taxes plus subsidies.
(d) Gross National Product (GNP) at market prices minus net factor income from abroad.
3. Consider the following statements concerning the Indian economy IAS (Pre) 2010
- The GDP has increased by four times in the last 10 years.
- The percentage share of the public sector in GDP has declined in the last 10 years.
Which of the statement(s) given above is/are correct?
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) Neither 1 nor 2
4. Consider the following statements with reference to the Indian economy IAS (Pre) 2015
- The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
- The Gross Domestic Product at Market Price (in rupees) has steadily increased in the last decade.
Which of the statement(s) given above is/are correct?
(a) Only 1
(b) Both 1 and 2
(c) Only 2
(d) Neither 1 nor 2
5. The national income of a country for a given period is equal to the IAS (Pre) 2013
(a) value of goods and services produced by the nationals.
(b) sum of total consumption and investment expenditure.
(c) sum of personal income of all individuals.
(d) money value of final goods and services produced.
6. The Net National Product at Market Price (NNPMP) is RAS/RTS (Pre) 2021
(a) Gross National Product at market price-net income from abroad.
(b) Gross National Product at market price-transfer payments.
(c) Gross National Product at market price-depreciation.
(d) Gross National Product at market price-subsidies
7. One of the problems in calculating national income in India is BPSC (Pre) 2017
(a) underemployment
(b) inflation
(c) low level of savings
(d) non-organised sector
8. Base year’ in national income accounting means UPPSC (Pre) 2005, RAS/RTS (Pre) 2021
( a) the year whose income is being used to calculate the nominal GDP
(b) the year whose prices are being used to calculate the nominal GDP
(c) the year whose prices are being used to calculate the real GDP
(d) the year whose income is being used to calculate the real GDP
9. Indicate the vital change in the measurement of national income of India recently UPPSC (Pre) 2005, RAS/RTS (Pre) 2021
(a) both the base year and calculation method have changed
(b) base year has been changed from 2004-2005 to 2011-2012
(c) calculation has changed from factor cost to market prices
(d) calculation has changed from current prices to constant prices
10. Net National Product (NNP) and Gross National Product (GNP) are
(a) value measures of the national product.
(b) valuation of national product of factor cost.
(c) value measures of exports.
(d) both are different.
11. Consider the following statements:
Statement 1 Net Domestic Product = Gross Domestic Product + Depreciation.
Statement 2 Per-Capita Income-Net Domestic Product/Total population of the nation.
Statement 3 Net Domestic Product is the better tries than Gross Domestic Product for comparing the economies of the world. CGPSC (Pre) 2020
Codes
(a) Statements 1, 2 and 3 all are true.
(b) Only statement I and statement 2 are true.
(c) Only statement 2 and statement 3 are true.
(d) None of the above statements are true.
12. Economic development is usually coupled with IAS (Pre) 2011, 2019
(a) deflation
(b) inflation
(c) stagflation
(d) hyper
13. Hindu growth rate is related to UPPSC (Pre) 1996, 2006, and BPSC (Pre) 2019
(a) money
(c) population
(b) gross domestic product
(d) gross national product
14. Which of the following is not a method to calculate the Gross Domestic Product (GDP)?
(a) Product method
(c) Income method
(b) Diminishing
(d) Expenditure method
15. Which of the following statement(s) is/are correct?
1. If a country is experiencing an increase in its GDP per capita, then its GDP must necessarily be Increasing.
2. If a country is experiencing negative inflation, then its GDP will be decreasing.
Codes
(a) Only 1
(b) Only 2
(c) Both 1 and 2
(d) Neither 1 nor 2
16. The proportion of labor in Gross National Product (GNP) becomes low due to the following reasons
(a) prices lag behind wages
(b) profit lags behind prices
(c) prices lag behind profit
(d) wages lag behind prices
17. Growth in absolute and per-capita real GNP does not indicate a high rate of economic growth if IAS (Pre) 2018
(a) industrial production fails to grow agricultural production goes.
(b) agricultural production failed to grow along with industrial production.
c) poverty and unemployment increases.
(d) imports grow faster than exports.
18. Despite being a high-saving economy, capital formation may not result in a significant increase in output due to IAS (Pre) 2018
(a) weak administrative machinery
(b) illiteracy
(c) high population density
(d) high capital-output ratio
Know Right Answer
1. (c)
2. (d)
3. (b)
4. (b)
5. (b)
6. (a)
7. (a)
8. (a)
9. (c)
10. (b
11. (c)
12. (a)
13. (d)
14. (c)
15. (d)
16. (a)
17. (c)
18. (d)
Frequently Asked Questions (FAQs)
Q1: What is National Income and why is it important in the context of the Indian economy?
A1: National Income is the total value of all goods and services produced within a country’s borders in a specific time period. It includes the income earned by the citizens and businesses of the country, both domestically and abroad. In the context of the Indian economy, National Income serves as a key indicator of the country’s economic health and development. It helps policymakers assess the overall performance of the economy, formulate effective economic policies, and measure the standard of living of the citizens.
Q2: How is Gross Domestic Product (GDP) calculated, and what are its components in the context of Indian National Income?
A2: GDP, a crucial component of National Income, is calculated using three approaches: the production approach, income approach, and expenditure approach. In the production approach, GDP is calculated by summing up the value of all goods and services produced in various sectors. The income approach involves adding up all incomes earned by factors of production (such as wages, profits, and rents). The expenditure approach calculates GDP by summing up all expenditures on final goods and services. In the context of Indian National Income, GDP components include consumption expenditure, investment expenditure, government expenditure, and net exports (exports minus imports).
Q3: What role does the Central Statistical Office (CSO) play in compiling National Income data for the Indian economy?
A3: The Central Statistical Office (CSO) is responsible for compiling and releasing National Income data for the Indian economy. It operates under the Ministry of Statistics and Programme Implementation. The CSO gathers information from various sources, such as government departments, businesses, and surveys, to estimate the economic activities in different sectors. By using this data, the CSO calculates GDP and other related indicators. The CSO’s role is crucial in providing accurate and timely information to policymakers, researchers, and the public, helping them make informed decisions about economic policies and interventions.
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