National Income & Growth — PPSC previous year questions

Economist Raj Krishna of the Delhi School of Economics coined the term 'Hindu rate of growth' in 1978. It described India's sluggish growth of about 3.5% a year from the 1950s to the 1980s under the planned economy. Robert McNamara made the phrase popular. It does not refer to religion. It was a wry comment on India's apparent contentment with low growth, which ended after the 1991 reforms.

Purchasing Power Parity compares economies by asking what a unit of local currency can actually buy in each country (the same basket of goods), instead of converting at market exchange rates. This corrects for the fact that prices are lower in some countries, so a rupee buys more in India than its dollar value buys in the USA.

Intermediate goods are raw materials, components and goods bought for resale. National income leaves them out to avoid double counting. Their value is already inside the value of the final goods they go into. Counting flour and then the bread made from it would count the flour twice. So national income measures only final goods and services. The same result comes from adding the value added at each stage.

GNP = GDP + Net Factor Income from Abroad (NFIA), so the gap between the two is NFIA. NFIA is the income Indians earn abroad (wages, interest, profit, rent) minus what foreigners earn inside India. Net imports and investment do not enter this relation.

The Central Statistical Organisation prepared India's national income estimates: GDP, GNP and the annual National Accounts Statistics, along with the Index of Industrial Production and the CPI (Urban and Combined). Prices are set by markets, money supply is the RBI's domain, and employment data came from the NSSO's surveys. Note the date: in 2019 the CSO and the NSSO were merged into the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation, which has done this work since then.

Bhutan alone uses Gross National Happiness (GNH) as its official measure of national progress. King Jigme Singye Wangchuck introduced the idea in the 1970s. It rests on four pillars: sustainable development, cultural preservation, environmental conservation and good governance. India, Bangladesh and Sweden use conventional GDP-based measures. So only 4 is correct.

National income is Net National Product, that is Gross National Product minus depreciation (consumption of fixed capital), reckoned at factor cost. GDP measures output produced within the country's boundaries, GNP adds net factor income from abroad, and GDP less depreciation gives net domestic product, not national income.