Question 56 from UPSC CSE 2015 - Economy

Question

With reference to the 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?

IASCODEX · Accepted Answer

Correct Option: B. 2 only

Strategy: Compare the two statements against known economic trends. First, evaluate the claim of steady real GDP growth by checking for historical fluctuations, such as during the 2008-09 financial crisis. Second, assess the claim of continual nominal GDP increase, considering the effects of inflation and real growth. Conclude based on which statement aligns with these trends.

Key Info: **Real Gross Domestic Product (Real GDP)** represents the total value of goods and services produced, adjusted for inflation. A country's real GDP growth rate can vary year to year due to multiple factors, including economic downturns, global crises like the **2008-09 financial crisis**, domestic demand shifts, and government policies. India has specifically seen fluctuating real GDP growth rates with periods of both acceleration and slowdown over the past decade.

In contrast, **Gross Domestic Product at current market prices (nominal GDP)** in rupees typically increases every year. This is because it reflects both real output growth and inflation. Even when real growth is low or negative, inflation usually ensures that the nominal GDP remains on a consistently rising trajectory.

Data from sources like the Planning Commission (now NITI Aayog) and the CSO confirm that nominal GDP, measured in rupees at market prices, does not decline over extended periods. This is due to the combined effects of economic growth and inflation. Thus, the assertion that nominal GDP at market prices has steadily increased over the past decade is factually supported.

IASCODEX · Answer

Option A: 1 only

IASCODEX · Answer

Option C: Both 1 and 2

IASCODEX · Answer

Option D: Neither 1 nor 2