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Subject: National Income Accounting(GDP)

  • Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.

    India is projected to sustain GDP growth of 6.5% between FY28-30, positioning it as the world’s third-largest consumer market by 2026 and the third-largest economy by 2028. (UBS)

    Arguments Supporting the View (Indian economy in good shape)

    High GDP Growth – India remains the fastest-growing major economy. 7% in FY 2025.

    Moderating Inflation – Eg- Retail inflation fell to a historic low of 0.25% in October 2025, due to GST rate cuts

    Forex reserves at over $689 billion provide external stability.

    Fiscal Consolidation Path- Fiscal deficit targeted to reduce to 4.8% of GDP in 2025-26.

    Robust Financial Sector- Gross NPAs have declined from 9.11% (2021) to 2.8% (2025).

    Production-linked incentives (PLI) has raised India’s manufacturing attractiveness. Eg: Electronics exports at a record $38 billion in 2024-25. (32% increase)

    Arguments Against the View (Macro vulnerabilities persist)

    Jobless Growth –Service sector contributes 55% of GDP but employs less than 30% workforce

    High food inflation due to climate shocks, hurting the poor.

    Rural Distress due to weak agriculture real wages and uneven monsoons.

    Global slowdown, protectionism, and China’s dominance limit India’s merchandise exports.

    High Public Debt- General government debt remains around 82% of GDP (IMF, 2024), limiting fiscal room.

    The share of Gross Fixed Capital Formation (GFCF) was about 34.6% of GDP in 2023-24 and slipped to 29.61% of GDP in 2024, indicating weak investment.

    Way Forward

    Enhance R&D (2.5% of GDP), reduce logistics costs (PM Gati Shakti), and expand PLI schemes to boost manufacturing.

    Promote labour-intensive manufacturing (textiles, toys, food processing) and expand services exports (IT, GBS, health tourism).

    Improve ease of doing business, accelerate contract enforcement, and reduce regulatory uncertainty to crowd-in private capital.

    Strengthen FOREX buffers and expand rupee trade settlement

    Encourage domestic production of critical inputs (electronics, APIs, green tech) to reduce vulnerability to global shocks.

    As highlighted by the Economic Survey, India must prioritise blue-sky thinking and foster a virtuous cycle of investment to achieve Viksit Bharat@2047.

  • Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP?

    Potential GDP refers to the maximum sustainable output an economy can produce without generating inflationary pressure, when all resources are fully and efficiently employed.

    Determinants of Potential GDP

    Labour Force & Human Capital – Size, skill, and productivity of the workforce.

    Capital Formation – Investment in infrastructure, machinery, and technology.

    Technology & Innovation – R&D and digital transformation driving productivity.

    Institutional Quality – Governance, regulatory efficiency, and property rights.

    Total Factor Productivity (TFP) – Efficiency in using labour and capital together.

    Prevailing Inflation Rate – Persistent inflation distorts real GDP from its potential level.

    Global Conditions – Protectionism, trade restrictions, and geopolitical tensions. Eg- Tariff Wars

    Factors Inhibiting India from Realizing Potential GDP

    Low Female Labour Force Participation – FLFPR only 41.7% (PLFS) against global average of 48%

    Slow Capital Formation – GFCF at ~29.6% of GDP (2024) vs 34% in 2023.

    Skill Mismatch & Education Gaps – Only 4.7% of workforce formally skilled (NSDC).

    Infrastructure Bottlenecks – Logistics cost ~13% of GDP vs 8% in USA

    Weak Productivity Growth – Low TFP and informal sector dominance. (83% informal sector)

    Regulatory Cholesterol – Delays, compliance burden, weak contract enforcement.

    Way Forward

    Enhance Human Capital – Invest in education, healthcare, and skill development

    Accelerate Investment & Infrastructure Growth through faster project execution under PPP.

    Create safe workplaces, flexible jobs, and childcare support to tap women’s economic potential.

    Increase R&D spending to 2.5% of GDP (currently <1% of GDP) for productivity gains.

    To realize its potential GDP and Viksit Bharat 2047, India must shift from factor accumulation to productivity-driven growth

  • Explain the difference between computing methodology of India’s Gross Domestic Product(GDP) before the year 2015 and after the year 2015.

    Gross Domestic Product (GDP) is the total monetary value of all final goods and services produced within a country’s borders in a given period. GDP in India is calculated by the National Statistical Office (NSO).

    The post-2015 GDP methodology aims to provide a more accurate, data-rich, and globally comparable picture of India’s economy. To improve reliability, there is a need for greater transparency.

  • Consider the following statements

    Consider the following statements:

    1.Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries.
    2.In terms of PPP dollars, India is the sixth largest economy in the world.
    Which of the statements given above is/are correct?

    (a) 1 only
    (b) 2 only
    (c) Both 1 and 2
    (d) Neither 1 nor 2

  • Which of the following pairs about India’s economic indicator and agricultural production (all in rounded figures) are correctly matched

    Which of the following pairs about India’s economic indicator and agricultural production (all in rounded figures) are correctly matched?
    1. GDP per capita (current prices): Rs 37,000
    2. Rice: 180 million tons
    3. Wheat: 75 million tons.

  • With reference to India economy, consider the following statements

    With reference to India economy, consider the following statements:
    1. The Gross Domestic Product (GDP) has increased by four times in the last 10 years
    2. The percentage share of Public Sector in GDP has declined in the last 10 years
    Which of the statements given above is/are correct?

  • In the context of Indian economy, consider the following statements

    In the context of Indian economy, consider the following statements:
    1. The growth rate of GDP has steadily increased in the last five years.
    2. The growth rate in per capita income has steadily increased in the last five years.

  • In terms of economy, the visit by foreign nationals to witness the XIX Commonwealth Games in India amounted to

    In terms of economy, the visit by foreign nationals to witness the XIX Commonwealth Games in India amounted to

  • In India the overall Index of Industrial Production, the Indices of Eight Core Industries have combined weight of 37.90%. Which of the following are among those Eight Core Industries? 1. Cement 2. Fertilizers 3. Natural Gas 4. Refinery products 5. Textiles Select the correct answer using the code given below

    In India the overall Index of Industrial Production, the Indices of Eight Core Industries have combined weight of 37.90%. Which of the following are among those Eight Core Industries? 1. Cement 2. Fertilizers 3. Natural Gas 4. Refinery products 5. Textiles Select the correct answer using the code given below:

  • The national income of a country for a given period is equal to the

    The national income of a country for a given period is equal to the