UPSC Prelims 2015 Q81: Indian Economy – National Income & Economic Growth
With reference to Indian economy, consider the following statements:
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last
decade.
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
Answer: (b) 2 only
Explanation
GDP growth and GDP level, 2005 to 2015
The key word is 'steadily'.
| Statement | Verdict | Fact |
|---|---|---|
| 1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade | Incorrect | The growth rate went up and down: high before 2008, a dip in 2008-09, recovery, then a slowdown in 2012-13 |
| 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade | Correct | The size of GDP in rupees rose every year, helped by growth and inflation |
Rate versus level:
| Term | Meaning | Can it rise every year? |
|---|---|---|
| Growth rate | Percentage change in GDP | No; it fluctuates |
| GDP at market prices | Total value in current rupees | Yes, unless output falls |
Even when the growth rate slows, GDP itself still increases.
Answer: (b) 2 only.
Why each option is right or wrong
- (a) Incorrect. The rate of growth of real GDP did not rise steadily.
- (b) CORRECT. GDP at market prices in rupees increased steadily over the decade.
- (c) Incorrect. Statement 1 is false; growth rates fluctuated.
- (d) Incorrect. Statement 2 is true; the rupee value of GDP rose every year.
Key point
Growth rate of real GDP fluctuates (dips in 2008-09 and 2012-13); GDP at market prices in rupees rose steadily because output and prices both grew.
Remember
GDP level rose steadily; growth rate did not.
Common mistakes
- Confusing the growth rate with the level of GDP.
- Thinking a slowdown means GDP fell; it only grew more slowly.
- Ignoring the word 'steadily' in both statements.
Exam tip
Rates wobble; levels climb. A slower growth rate still means a bigger GDP.
Sources
- Ministry of Finance — Economic Survey 2014-15 (State of the Economy)
- NCERT Class XII — Introductory Macroeconomics, Ch 2 (National Income Accounting)