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02 Indian Economy — Common Notes 🕒 Updated 2026-10-17 ✅ Facts verified till 2026-10-17
Common Notes SSC CGL · CHSL · Police · Bank · Railway · State PSC Chapter 02

📊 National Income

GDP, GNP, NNP, GVA, methods of measurement, the new 2022-23 base-year series and per capita income.

📌 1. Key Aggregates

AggregateFormula / meaning
GDPMarket value of all final goods and services produced within the country's borders in a year
GNPGDP + net factor income from abroad (NFIA)
NDPGDP − depreciation
NNPGNP − depreciation
NNP at factor cost = National IncomeNNP at market price − indirect taxes + subsidies
GVAValue of output − intermediate consumption; GDP = GVA + product taxes − product subsidies
  • GDP is "domestic" (inside the country); GNP is "national" (income of residents, wherever earned).
  • Intermediate goods are not added (to avoid double counting) — only final goods.
  • Sale of second-hand goods, purchase of shares and transfer payments (pensions, scholarships) are not part of GDP.

📌 2. Methods of Measurement

MethodWhat is added
Production / value-added methodValue added by all sectors
Income methodWages + rent + interest + profit (+ mixed income)
Expenditure methodC + I + G + (X − M)
  • C = private consumption, I = investment, G = government spending, X − M = net exports.
  • Nominal GDP is at current prices; real GDP at constant (base-year) prices. GDP deflator = nominal ÷ real × 100.

📌 3. Estimating National Income in India

  • First estimate: Dadabhai Naoroji (1867-68), book Poverty and Un-British Rule in India.
  • First scientific estimate: V. K. R. V. Rao (1931-32).
  • National Income Committee (1949) — chaired by P. C. Mahalanobis.
  • Today estimates are made by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) (CSO and NSSO merged into NSO in 2019).
  • New base year 2022-23: the new GDP series was released on 27 February 2026, replacing the 2011-12 base.
  • India's financial year runs from 1 April to 31 March; NSO also releases quarterly GDP estimates.
IndicatorNew base year (as of 2026)
GDP / GVA2022-23
CPI2024 (from February 2026)
WPI / PPI2022-23 (from June 2026)
IIP2022-23 (from June 2026)

📌 4. Per Capita Income & Other Points

  • Per capita income = national income ÷ population.
  • GDP at purchasing power parity (PPP) allows real cross-country comparison; at PPP India is the third-largest economy in the world.
  • Green GDP subtracts environmental damage; Gross National Happiness is Bhutan's idea.
⚠️ Exam Traps:
  • GDP − depreciation = NDP (not GNP).
  • National income = NNP at factor cost, not at market price.
  • If NFIA is negative, GNP is less than GDP (usually the case for India).
  • The name CSO is no longer used — it has been NSO since 2019.
💡 Memory Tip: D → N (add income from abroad), Gross → Net (subtract depreciation), MP → FC (subtract indirect taxes, add subsidies).

📌 5. Practice MCQs

📝 Practice MCQs (prepared by SF Prep — not PYQs)
Q1. GDP measures the value of: Practice
(A) Final goods and services produced within the country
(B) Only exported goods
(C) Citizens' income from abroad
(D) All intermediate goods
Correct answer: (A)
GDP is the market value of final goods and services produced within the country's borders in a year.
Q2. GNP = ? Practice
(A) GDP − depreciation
(B) GDP + net factor income from abroad
(C) NNP + indirect taxes
(D) GDP − exports
Correct answer: (B)
The national product adds residents' net factor income from abroad.
Q3. GDP minus depreciation gives: Practice
(A) NDP
(B) GNP
(C) NNP
(D) GVA
Correct answer: (A)
Subtracting depreciation turns Gross into Net; it stays domestic, so NDP.
Q4. What is called "national income"? Practice
(A) GDP at market price
(B) GNP at market price
(C) NNP at factor cost
(D) NDP at factor cost
Correct answer: (C)
National income = NNP at factor cost = NNP at market price − indirect taxes + subsidies.
Q5. The expenditure-method formula for GDP is: Practice
(A) C + I − G + X
(B) Wages + profit − taxes
(C) C + S + T
(D) C + I + G + (X − M)
Correct answer: (D)
Consumption + investment + government spending + net exports.
Q6. Which is NOT added in the income method? Practice
(A) Wages
(B) Old-age pension (transfer payment)
(C) Rent
(D) Interest
Correct answer: (B)
Transfer payments such as pensions are not linked to current production, so they are left out.
Q7. To avoid double counting, GDP excludes: Practice
(A) Final goods
(B) Intermediate goods
(C) Services
(D) Capital goods
Correct answer: (B)
The value of intermediate goods is already included in the price of final goods.
Q8. Real GDP is measured at: Practice
(A) Current prices
(B) International prices
(C) Constant (base-year) prices
(D) Wholesale prices only
Correct answer: (C)
Real GDP uses base-year prices so the effect of inflation is removed.
Q9. GDP deflator = ? Practice
(A) Real GDP ÷ nominal GDP × 100
(B) GDP ÷ population
(C) GNP − GDP
(D) Nominal GDP ÷ real GDP × 100
Correct answer: (D)
The deflator shows how much the price level has changed since the base year.
Q10. Who made the first estimate of India's national income? Practice
(A) Dadabhai Naoroji
(B) V. K. R. V. Rao
(C) P. C. Mahalanobis
(D) R. C. Dutt
Correct answer: (A)
Naoroji estimated it for 1867-68 (book: Poverty and Un-British Rule in India).
Q11. Who chaired the National Income Committee set up in 1949? Practice
(A) V. K. R. V. Rao
(B) D. R. Gadgil
(C) K. N. Raj
(D) P. C. Mahalanobis
Correct answer: (D)
Mahalanobis chaired the 1949 committee; Rao and Gadgil were members.
Q12. Who releases national income data in India today? Practice
(A) National Statistics Office (NSO), MoSPI
(B) Reserve Bank of India
(C) NITI Aayog
(D) Finance Commission
Correct answer: (A)
CSO and NSSO merged into NSO in 2019; under MoSPI it releases GDP estimates.
Q13. What is the base year of India's new GDP series? Practice
(A) 2011-12
(B) 2022-23
(C) 2017-18
(D) 2024-25
Correct answer: (B)
MoSPI released the new series with base year 2022-23 on 27 February 2026, replacing 2011-12.
Q14. Per capita income = ? Practice
(A) GDP × population
(B) National income ÷ number of households
(C) National income ÷ population
(D) GDP − taxes
Correct answer: (C)
Dividing total national income by population gives the average income.
Q15. If net factor income from abroad is negative, then: Practice
(A) GNP will be more than GDP
(B) GNP = GDP
(C) GNP will be less than GDP
(D) NDP will be zero
Correct answer: (C)
GNP = GDP + NFIA; a negative NFIA makes GNP smaller.
Q16. GDP = GVA + ? Practice
(A) Depreciation
(B) Income from abroad
(C) Transfer payments
(D) Product taxes − product subsidies
Correct answer: (D)
GVA is at the producer level; adding product taxes and subtracting subsidies gives GDP at market prices.
Q17. Which of these is included in GDP? Practice
(A) Sale of a newly made car
(B) Sale of a second-hand car
(C) Purchase of shares
(D) Scholarship
Correct answer: (A)
Only the value of current new production is counted; second-hand goods, shares and transfers are not.
Q18. The idea of "Gross National Happiness" is linked to which country? Practice
(A) Nepal
(B) Bhutan
(C) Sri Lanka
(D) Japan
Correct answer: (B)
Bhutan is known for measuring progress by happiness rather than only GDP.
Q19. To get national income from NNP at market price, we: Practice
(A) Subtract indirect taxes and add subsidies
(B) Subtract depreciation
(C) Add income from abroad
(D) Add direct taxes
Correct answer: (A)
Market prices include indirect taxes and are lowered by subsidies; reverse both to reach factor cost.
Q20. Who made the first scientific estimate (1931-32) of India's national income? Practice
(A) Dadabhai Naoroji
(B) William Digby
(C) V. K. R. V. Rao
(D) Findlay Shirras
Correct answer: (C)
Rao estimated national income for 1931-32 using a scientific method.

📝 Practice questions

Indian Economy — Practice MCQs (Bilingual) Ch 2: National Income
📝 Test this chapter Practice questions

Practice MCQs SF Prep द्वारा तैयार (PYQ नहीं)। तथ्य RBI, MoSPI, बजट दस्तावेज़ों, PIB व अन्य आधिकारिक स्रोतों से अक्टूबर 2026 तक जाँचे गए।