GDP & National Income — Set 8

Correct Answer: B. B. State-level

VAT (Value Added Tax) was a state-level indirect tax that was replaced by GST in July 2017. Before GST, states levied VAT on most goods, leading to a complex patchwork of different tax rates across states. GST unified these into a single national tax, improving the national common market.

Correct Answer: B. B. 17-20%

Manufacturing contributes approximately 17-20% to India's GDP, which is lower than the government's target of 25% set under the National Manufacturing Policy 2011. China's manufacturing share is about 27-28%. The Make in India initiative aims to boost manufacturing's share to drive job creation and economic growth.

Correct Answer: B. B. Counting the value of intermediate goods multiple times across production stages

Double counting in GDP measurement occurs when the value of intermediate goods is counted at each stage of production rather than only at the final stage. The Value Added Method avoids double counting by counting only the value added at each stage. Similarly, the Expenditure Method counts only final goods and services.

Correct Answer: C. C. Exports minus Imports

Net Exports (NX) = Exports (X) - Imports (M). It is the difference between the value of goods and services sold to foreign buyers and those bought from foreign producers. Positive NX (trade surplus) adds to GDP; negative NX (trade deficit) reduces GDP. India generally runs a trade deficit due to high imports.

Correct Answer: B. B. Bhutan

Gross National Happiness (GNH) was pioneered by Bhutan as an alternative to GDP for measuring economic and social progress. It covers nine domains including living standards, education, health, time use, good governance, and ecological diversity. GNH philosophy argues that happiness and well-being are more important goals than material output.

Correct Answer: B. B. 3rd

At Purchasing Power Parity (PPP), India is the 3rd largest economy globally, after the United States and China. PPP adjusts for price level differences between countries, making India appear much larger than its nominal GDP rank of 5th. India's large population and lower price levels boost its PPP-adjusted GDP significantly.

Correct Answer: B. B. This is the Expenditure Method of GDP

GDP = C + I + G + NX is the Expenditure Method formula. C (private consumption), I (gross investment), G (government spending), NX (net exports = exports - imports). This approach measures GDP by summing all expenditures on final goods and services in the economy during a given period.

Correct Answer: C. C. 7-8%

India's real GDP growth averaged approximately 7-8% per year during 2014-2019, making it consistently one of the world's fastest-growing major economies. This period saw India surpass China's growth rate in multiple years. Growth was driven by services, consumption, and government capital expenditure.

Correct Answer: C. C. Only production activities with market transactions

In national income accounting, 'economic activity' refers specifically to productive activities involving market transactions that generate income. This includes formal sector production, government services, and informal sector activities that are captured in surveys. Non-market activities like household work, voluntary service, and illegal activities are excluded.

Correct Answer: C. C. 30-33%

India's Gross Fixed Capital Formation (GFCF) as a percentage of GDP is approximately 30-33%. This represents total investment in fixed assets. The government has been pushing to increase capital expenditure (capex) as a share of GDP to crowd in private investment and boost long-term growth potential.