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 only

2 only

Both 1 and 2

Neither 1 nor 2

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2015

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Statement 1 is incorrect. The rate of growth of Real Gross Domestic Product (GDP) is subject to economic cycles and various domestic and global factors. It rarely increases steadily over a decade; there are typically fluctuations, periods of faster growth, and periods of slowdown. Statement 2 is correct. The Gross Domestic Product at market prices (Nominal GDP in rupees) reflects both the increase in the volume of goods and services produced (real growth) and the increase in prices (inflation). Over a decade, even with fluctuations in real growth, the combined effect of positive real growth (on average) and inflation almost guarantees a steady increase in nominal GDP in absolute rupee terms, year after year.

Nominal GDP (at market prices) in a growing economy like India typically increases every year due to real growth and inflation, while the rate of Real GDP growth is volatile and does not increase steadily over long periods.

Real GDP growth is a measure of the increase in the volume of production, adjusted for inflation. It indicates the actual expansion of the economy’s output capacity. Nominal GDP is the value of goods and services at current market prices. It reflects both volume changes and price changes. Over any typical decade in a developing economy with positive inflation and average positive real growth, nominal GDP tends to show a consistent upward trend, unlike the growth *rate* of real GDP.

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