GDP & National Income — Set 13

Correct Answer: B. B. PPP-based GDP comparisons across countries

The International Comparison Programme (ICP) is a global statistical initiative coordinated by the World Bank that collects price data from countries to compute Purchasing Power Parities (PPPs) for GDP comparisons. PPP allows meaningful comparison of GDP and living standards across countries with different price levels. India participates in ICP.

Correct Answer: C. C. 7.2%

India's real GDP growth for FY 2022-23 was approximately 7.2%, reflecting a robust post-COVID recovery. This was among the highest growth rates for a major economy globally that year. Growth was driven by private consumption, capital expenditure, and resilient services sector performance despite global headwinds from the Russia-Ukraine conflict.

Correct Answer: C. C. New factory building constructed by firm

Construction of a new factory building is a capital expenditure (investment) counted in the Gross Fixed Capital Formation (GFCF) component of GDP. It creates new productive capacity. In contrast, teacher salaries (government consumption), household food purchases (private consumption), and interest payments (transfer) are treated differently in national accounts.

Correct Answer: B. B. April to March

India's fiscal year (financial year) runs from April 1 to March 31. This is the period used for government budgeting, GDP measurement, and corporate financial reporting in India. The financial year is designated by two calendar years, e.g., FY 2023-24 refers to April 2023 to March 2024.

Correct Answer: B. B. Business confidence and expectations driving investment and GDP

'Animal Spirits' is a term coined by John Maynard Keynes to describe the instinct and confidence of entrepreneurs to invest and take risks. When animal spirits are strong (high business confidence), investment increases, boosting GDP. When animal spirits are weak (pessimism), investment declines, slowing GDP growth. Improving investor sentiment is a key policy goal.

Correct Answer: B. B. 8-9% per year

To reach a $5 trillion economy from the ~$2.7 trillion GDP in 2019, India would need to sustain approximately 8-9% nominal dollar GDP growth per year. This requires real growth of about 7-8% plus some currency appreciation against the dollar. COVID-19 delayed this target, with revised projections suggesting $5 trillion by FY 2026-27.

Correct Answer: B. B. United Kingdom

India overtook the United Kingdom (UK) to become the world's 5th largest economy in 2022. Before this, the UK held the 5th position and India was 6th. The UK's slower growth and pound depreciation combined with India's robust growth facilitated this position change. Before the UK, India surpassed France (which ranked 6th-7th).

Correct Answer: B. B. Analysing inter-industry transactions and value-added flows

Input-Output (I-O) tables, developed by Wassily Leontief, analyse inter-industry transactions and value-added flows in an economy. They show how different sectors buy inputs from and sell outputs to each other. NSO publishes I-O tables for India, which are used for GDP estimation, policy simulation, and identifying key sectors of the economy.

Correct Answer: B. B. GDP measured in base year prices to show real volume growth

Constant Price GDP (Real GDP) measures the value of output at fixed base year prices (currently 2011-12 for India). By holding prices constant, changes in real GDP reflect only changes in the volume of production. This allows accurate measurement of actual economic growth without inflation distortion.

Correct Answer: B. B. Net Exports (X-M) component

The contribution of the external sector to India's GDP growth is measured through Net Exports (NX = Exports - Imports), which is the NX component in GDP = C + I + G + NX. When exports grow faster than imports, NX contributes positively to GDP growth. India typically runs a trade deficit, meaning NX is usually a drag on GDP growth.