3.National income accounting (Part 3)

Question 1

What is the formula for GVA at basic prices?

Answer 1

GVA at basic prices = CE + OS/MI + CFC + Production taxes less Production subsidies

Question 2

What is the formula for GDP at market price?

Answer 2

GDP = GVA at basic prices + Product taxes - Product subsidies

Question 3

What is the formula for NDP/NNI?

Answer 3

NDP/NNI = GDP/GNI-CFC

Question 4

What is the formula for GNI?

Answer 4

GNI = GDP + Net primary income from ROW (Receipts less payments)

Question 5

What are the components of primary incomes?

Answer 5

Primary Incomes = CE + Property and Entrepreneurial Income

Question 6

What is the formula for NNDI?

Answer 6

NNDI = NNI + other current transfers from ROW, net (Receipts less payments)

Question 7

What is the formula for GNDI?

Answer 7

GNDI = NNDI+ CFC = GNI + other current transfers from ROW, net (Receipts less payments)

Question 8

What is the formula for Gross Capital Formation (GCF)?

Answer 8

Gross Capital Formation (GCF) = Gross Savings + Net Capital Inflow from ROW

Question 9

What are the components of GCF?

Answer 9

GCF= GFCF + CIS + Valuables + “Errors and Omissions”.

Question 10

What is the formula for Gross Disposable Income of Govt.?

Answer 10

Gross Disposable Income of Govt. = GFCE + Gross Saving of General Government

Question 11

What is the formula for Gross Disposable Income (GDI) of Households?

Answer 11

Gross Disposable Income (GDI) of Households = GNDI - GDI of Govt. - Grass Savings of all Corporations

Question 12

What is India’s ranking in terms of nominal GDP in the world?

Answer 12

India is the fifth largest economy in the world in terms of nominal GDP.

Question 13

What is India’s ranking in terms of GDP per capita in the world?

Answer 13

India is the 139th richest country in the world in terms of GDP per capita.

Question 14

What is GDP at Purchasing power parity (PPP)?

Answer 14

GDP at Purchasing power parity (PPP) is a measure of a country’s economic output that accounts for its currency’s purchasing power, or the amount of goods and services that can be purchased with one unit of the country’s currency.

Question 15

What is India’s ranking in terms of GDP at Purchasing power parity (PPP) in the world?

Answer 15

India is the third largest country in the world in terms of GDP at Purchasing power parity (PPP).

Question 16

Who calculates the GDP at Purchasing power parity (PPP) for India?

Answer 16

GDP at Purchasing power parity (PPP) for India is not calculated by the Indian government, but by international agencies such as the IMF, UN, and CIA (Central Investigation Agency of USA).

Question 17

What is Purchasing Power Parity (PPP)?

Answer 17

Purchasing power parity, or PPP, is a measurement of the cost of particular goods in various countries to compare the absolute purchasing power of currencies.

Question 18

How is PPP calculated?

Answer 18

The PPP ratio is calculated by dividing the price of a basket of goods at one location by the price of the same basket of goods at a different location.

Question 19

What is the difference between PPP and market exchange rate?

Answer 19

The PPP inflation and exchange rate may be different from the market exchange rate because PPP takes into account the relative cost of local goods and services of the country, rather than using International market exchange rates.

Question 20

Why is GDP at PPP considered more useful than Nominal GDP?

Answer 20

GDP comparisons using PPP are generally considered more useful than those using Nominal GDP when accessing the domestic market of a state because PPP takes into account the relative cost of local goods and services of the country.

Question 21

Which country has the first largest GDP at PPP?

Answer 21

China has the first largest GDP at PPP.

Question 22

Which country has the first largest GDP at PPP?

Answer 22

China has the first largest GDP at PPP.

Question 23

What is the contribution of Agriculture to India’s GDP?

Answer 23

The contribution of Agriculture to India’s GDP is 18.8%.

Question 24

What is the contribution of the Manufacturing sector to India’s GDP?

Answer 24

The contribution of the Manufacturing sector to India’s GDP is 28.2%.

Question 25

What is the contribution of the Service sector to India’s GDP?

Answer 25

The contribution of the Service sector to India’s GDP is 53%.

Question 26

What is the difference between India's nominal GDP and PPP GDP?

Answer 26

India is the fifth largest economy in the world in Nominal GDP, but in GDP per capita India is the 139th richest country in the world. In GDP at PPP, India is the third largest country of the world. If India's nominal GDP in 2022 is 3.46 trillion US dollars, then in terms of PPP it will be 3.46 trillion dollars X 3.36 = 11.66 trillion US dollars.

Question 27

How is PPP calculated in terms of the exchange rate?

Answer 27

As per International monetary fund calculations in 2022, if in the USA someone wants to buy something for 1 dollar on average, but in India, we have to pay around rupees 24.1 for the same thing on average. That means the exchange rate is 1 dollar equal to 24.1, and we need to increase the GDP by 3.36 times (81 divided by 24.10).

Question 28

What is ICOR?

Answer 28

❖ICOR stands for Incremental Capital Output Ratio. ❖It measures the amount of capital required to produce one extra unit of output.

Question 29

How is efficiency related to ICOR?

Answer 29

The higher the ICOR, the less efficient we are in the usage of capital.

Question 30

What is the Harrod Domar model?

Answer 30

The Harrod Domar model states that the growth rate is equal to the investment rate divided by the ICOR.

Question 31

What factors does ICOR depend upon?

Answer 31

ICOR depends upon the choice of industries, time and cost overrun, and technology.

Question 32

How does the choice of industries affect ICOR?

Answer 32

For heavy industries like steel, cement, aluminum, etc, the ICOR will be higher.

Question 33

How does time and cost overrun affect ICOR?

Answer 33

Time and cost overrun will increase ICOR. A recent report by MoSPI stated that there is a total extra amount of money spent on delayed projects worth rupees 4.3 lakh crores.

Question 34

How does technology affect ICOR?

Answer 34

Latest technology leads to lesser ICOR and old technology leads to more ICOR.

Question 35

What was the total extra cost incurred on delayed projects as per the MoSPI report?

Answer 35

As per the MoSPI report on 22nd February 2023, the total extra amount of money spent on delayed projects is rupees 4.5 lakh crores.

Question 36

How many government projects costing more than 150 crore rupees were hit by cost overruns as per the MoSPI report?

Answer 36

As per the MoSPI report, 343 government projects that cost more than 150 crore rupees were hit by cost overruns.

Question 37

How much was the original cost of implementation of the government projects according to the MoSPI report?

Answer 37

The original cost of implementation of the government projects was 20.35 lakh crore rupees, which is now 24.86 lakh crore.

Question 38

How many delayed projects were delayed by more than 60 months out of the total 835 delayed projects according to the MoSPI report?

Answer 38

Around 130 projects have been delayed by more than 60 months out of the total 835 delayed projects according to the MoSPI report.

Question 39

What is Net Disposable Income?

Answer 39

Net Disposable Income is the earned income left after tax deductions.

Question 40

How is discretionary income calculated?

Answer 40

Discretionary income is calculated by subtracting the amount of money needed for basic necessities like food, shelter, and clothing from Net Disposable Income.

Question 41

What is the significance of Net Disposable Income?

Answer 41

Net Disposable Income is important because it reflects the amount of money an individual has available for spending after taxes. It is the income that can be used for both necessary expenses and discretionary spending.

Question 42

How is Net Disposable Income different from Gross Income?

Answer 42

Gross Income is the total income earned before any deductions, such as taxes or social security. Net Disposable Income is the income left over after taxes and other deductions have been taken out.

Question 43

What is the importance of discretionary income?

Answer 43

Discretionary income is important because it reflects the amount of money an individual has available for non-essential purchases. It is used to determine an individual's purchasing power and can be used for things like vacations, entertainment, and luxury items.