UPSC Prelims 2001 Q68: Indian Economy – National Income & Economic Growth
The most appropriate measure of a country’s economic growth is its
- (a) Gross Domestic Product
- (b) Net Domestic Product
- (c) Net National Product
- (d) Per Capita Real Income
Answer: (d) Per Capita Real Income
Explanation
Most appropriate measure of a country's economic growth
| Measure | Why it is or is not the best |
|---|---|
| Per capita real income | Best — removes inflation (real) and population growth (per capita) |
| Gross Domestic Product | Can rise with prices and population without people being better off |
| Net Domestic Product | Removes depreciation, but not inflation or population |
| Net National Product | Adds foreign income, but still not per head or real |
Economic growth means a lasting rise in output per person. Per capita real income adjusts for both inflation and population, so it is the most appropriate measure. GDP and the other aggregates can rise just because prices or population rise.
Answer: (d) Per Capita Real Income.
Why each option is right or wrong
- (a) Incorrect. GDP is not adjusted for population and may not be real.
- (b) Incorrect. NDP is not adjusted for population.
- (c) Incorrect. NNP is not a per head measure.
- (d) CORRECT. Per capita real income best shows economic growth.
Key point
Economic growth = rise in real output; economic development = growth plus better health, education and living standards (HDI).
Remember
Economic growth is best measured by per capita real income.
Common mistakes
- Choosing GDP as the most common headline figure.
- Forgetting to adjust for inflation.
- Confusing economic growth with development.
Exam tip
'Most appropriate' usually means 'adjusted for prices and population'.
Sources
- NCERT Class XII — Introductory Macroeconomics, chapter 'National Income Accounting'
- NCERT Class X — Understanding Economic Development, chapter 'Development'