Real vs Nominal GDP: UPSC Prelims PYQ 2015 — Indian economy

 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?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Explanation

Statement 1 is incorrect

• The growth rate of Real Gross Domestic Product (GDP) has fluctuated significantly over the decade from 2004 to 2014, with a notable decline in 2008-09 due to the global financial crisis.

Statement 2 is correct

• GDP at market prices, measured in nominal terms, has steadily increased over the 2004-2014 due to inflation, population growth, and overall economic expansion, even during periods of slower real GDP growth

Answer: (b) 2 only; Difficulty Level: Easy