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National Income Accounting MCQs

Practise 80+ National Income Accounting MCQs for UPSC Prelims in Indian Economy, including 7+ previous year questions. The sample set below is shown with correct answers and explanations.

80
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Sample National Income Accounting questions

12 sample questions are shown here; sign up free to practise all 80.

Q1Indian EconomyNational Income AccountingPYQ 2016

With the new GDP series (base year 2011-12), the Central Statistics Office replaced GDP at factor cost with:

  • AGDP at market prices
  • BGross Value Added (GVA) at basic pricesCorrect
  • CNet National Product at factor cost
  • DGVA at market prices

Explanation

Correct. In the new series, GVA at basic prices replaced GDP at factor cost as the measure of sectoral economic performance. GDP at market prices became the headline GDP number. The relationship is: GDP at market prices = GVA at basic prices + Product taxes - Product subsidies.

Why the other options are incorrect
Option A

GDP at market prices became the headline measure of economic output, but it replaced GDP at factor cost as the headline number. GVA at basic prices is what replaced GDP at factor cost as the sectoral performance measure.

Option C

NNP at factor cost is a measure of national income, not the replacement for GDP at factor cost in the new series.

Option D

GVA at market prices is not a standard term used in Indian national accounts. The correct term is GVA at basic prices.

Q2Indian EconomyNational Income AccountingPYQ 2015

In the new GDP series, which of the following data sources is used extensively for estimating private corporate sector performance?

  • AAnnual Survey of Industries (ASI)
  • BMCA-21 database of the Ministry of Corporate AffairsCorrect
  • CCensus of India
  • DConsumer Expenditure Survey

Explanation

Correct. The new GDP series (2011-12 base) extensively uses the MCA-21 database, which contains financial data from corporate filings with the Ministry of Corporate Affairs. This was a major methodological change that expanded coverage of the private corporate sector and contributed to the higher GDP estimates in the new series.

Why the other options are incorrect
Option A

ASI is an important source for manufacturing sector data but is not the primary innovation in the new GDP series for corporate sector estimation.

Option C

Census of India provides demographic data and is conducted every 10 years. It is not used for GDP estimation of the corporate sector.

Option D

Consumer Expenditure Survey (conducted by NSSO) measures household spending patterns. It is relevant for PFCE estimation, not corporate sector performance.

Q3Indian EconomyNational Income AccountingPYQ 2015

Consider the following statements: 1. The real GDP growth rate in India has steadily increased in every year of the last decade. 2. India's nominal GDP has consistently increased in the last decade. Which of the statements given above is/are correct?

  • A1 only
  • B2 onlyCorrect
  • CBoth 1 and 2
  • DNeither 1 nor 2

Explanation

Correct. Statement 1 is false because real GDP growth rate has fluctuated, including a contraction during COVID-19. Statement 2 is true because nominal GDP (at current prices) has consistently increased year-on-year due to the combined effect of real output growth and inflation, even when real GDP contracted.

Why the other options are incorrect
Option A

Statement 1 is incorrect. Real GDP growth rate has not steadily increased every year — it fluctuated, declining sharply during 2019-20 (pre-COVID slowdown) and contracting in 2020-21 due to the pandemic.

Option C

Only Statement 2 is correct. Real GDP growth has not been steady — it experienced significant volatility.

Option D

Statement 2 is correct — nominal GDP has risen every year due to inflation even when real output fell.

Q4Indian EconomyNational Income AccountingPYQ 2012

Which of the following sectors is NOT included in the eight core industries index of India?

  • ACoal
  • BSteel
  • CTextilesCorrect
  • DCement

Explanation

Correct. Textiles is NOT one of the eight core industries. The eight core industries are: Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, and Electricity. Together they have a combined weight of about 40.27% in the IIP.

Why the other options are incorrect
Option A

Coal is one of the eight core industries with a weight of 10.33% in the Index of Industrial Production (IIP).

Option B

Steel is one of the eight core industries with a weight of 17.92% in the IIP.

Option D

Cement is one of the eight core industries with a weight of 5.37% in the IIP.

Q5Indian EconomyNational Income AccountingPYQ 2007

The correct decreasing order of sectoral contribution to India's GDP is:

  • AServices - Industry - AgricultureCorrect
  • BServices - Agriculture - Industry
  • CIndustry - Services - Agriculture
  • DAgriculture - Services - Industry

Explanation

Correct. As of recent years, services contribute about 54% to India's GVA, industry about 26-28%, and agriculture about 15-18%. This services-industry-agriculture order has been stable since the early 2000s.

Why the other options are incorrect
Option B

Agriculture's share is lower than industry's share in India's GDP. Industry surpassed agriculture's share decades ago.

Option C

Industry does not contribute the most — services sector is the largest contributor to India's GDP since the 1990s.

Option D

Agriculture is the smallest contributor among the three broad sectors of the economy.

Q6Indian EconomyNational Income AccountingPYQ 2000

Which of the following is the correct formula for National Income in terms of national income aggregates?

  • AGDP at market prices + Net factor income from abroad
  • BNNP at factor costCorrect
  • CGDP at factor cost - Depreciation
  • DGNP at market prices - Indirect taxes

Explanation

Correct. National Income = NNP at factor cost. This is the standard definition. It can be derived as: GDP at market prices + NFIA - Depreciation - Net indirect taxes (or equivalently, Net product taxes). It represents the total income earned by the normal residents of a country.

Why the other options are incorrect
Option A

GDP at market prices + NFIA gives GNP at market prices, not National Income. Further adjustments for depreciation and taxes/subsidies are needed.

Option C

GDP at factor cost - Depreciation gives NDP at factor cost, which does not include NFIA. National Income must account for income from abroad.

Option D

GNP at market prices - Indirect taxes is incomplete. One must also add subsidies and deduct depreciation to arrive at NNP at factor cost.

Q7Indian EconomyNational Income AccountingPYQ 1999

Consider the following statements about the tertiary sector in India: 1. Its share in India's GDP has shown an increasing trend since the 1980s. 2. It employs the largest share of India's workforce. Which of the statements given above is/are correct?

  • A1 onlyCorrect
  • B2 only
  • CBoth 1 and 2
  • DNeither 1 nor 2

Explanation

Correct. Statement 1 is true — the tertiary (services) sector's share in GDP has been rising consistently since the 1980s, from about 40% to over 54%. Statement 2 is false — despite contributing the most to GDP, the services sector does not employ the largest share of the workforce. Agriculture still employs the largest share (about 42-45% of workers), highlighting the structural mismatch in India's economy.

Why the other options are incorrect
Option B

Statement 2 is incorrect. Agriculture, not services, employs the largest share of India's workforce despite contributing only about 15-18% of GDP.

Option C

Only Statement 1 is correct. The GDP-employment mismatch is a key feature of India's economy.

Option D

Statement 1 is correct — the services sector share in GDP has been on a consistent upward trajectory.

Q8Indian EconomyNational Income Accounting

Consider the following statements: 1. India uses the financial year (April-March) for national accounts. 2. The NSO is headed by the Chief Statistician of India. 3. The base year for GDP should ideally be a year of economic normalcy. Which of the statements given above is/are correct?

  • A1 and 2 only
  • B1 and 3 only
  • C2 and 3 only
  • D1, 2 and 3Correct

Explanation

Correct. Statement 1: India follows the April-March financial year for national accounts, unlike many Western countries using calendar year. Statement 2: The NSO is headed by the Secretary (Statistics) who also serves as the Chief Statistician of India. Statement 3: The base year should be a 'normal' year without major disruptions (like droughts, pandemics, or wars) so that the price structure used as benchmark is representative and stable.

Why the other options are incorrect
Option A

All three statements are correct, not just 1 and 2.

Option B

All three statements are correct, not just 1 and 3.

Option C

All three statements are correct, not just 2 and 3.

Q9Indian EconomyNational Income Accounting

Which of the following is the correct sequence of GDP estimation releases by the NSO during and after a financial year?

  • AFirst Advance Estimate → Provisional Estimate → Second Advance Estimate → Revised Estimates
  • BFirst Advance Estimate → Second Advance Estimate → Provisional Estimate → Revised EstimatesCorrect
  • CProvisional Estimate → First Advance Estimate → Second Advance Estimate → Revised Estimates
  • DSecond Advance Estimate → First Advance Estimate → Provisional Estimate → Revised Estimates

Explanation

Correct. The sequence is: First Advance Estimate (January) → Second Advance Estimate (late February) → Provisional Estimate (May, after year ends) → First Revised Estimate (January, next year) → Second Revised Estimate → Third Revised Estimate. Each successive estimate uses more comprehensive data.

Why the other options are incorrect
Option A

The Provisional Estimate does not come before the Second Advance Estimate. SAE is released in February, while Provisional Estimate comes in May.

Option C

The Provisional Estimate cannot come first — it requires the financial year to end. Advance Estimates come during the financial year.

Option D

The First Advance Estimate comes before the Second, not after.

Q10Indian EconomyNational Income Accounting

Which of the following correctly describes the difference between 'factor cost' and 'basic prices'?

  • AThey are identical concepts with no difference
  • BBasic prices include production subsidies but exclude all taxes; factor cost excludes both production taxes and subsidies
  • CBasic prices include other subsidies on production but exclude product taxes; factor cost excludes all taxes and includes all subsidiesCorrect
  • DFactor cost is used only in the new GDP series while basic prices were used in the old series

Explanation

Correct. Basic prices = Factor cost + Other taxes on production - Other subsidies on production. In other words, basic prices include production taxes and subsidies on production within the price, while factor cost strips out all taxes and adds back all subsidies. The new GDP series uses basic prices for GVA, while the old series used factor cost. The difference is usually small but conceptually important.

Why the other options are incorrect
Option A

Factor cost and basic prices are related but distinct concepts. Basic prices are slightly higher than factor cost because they include some tax elements.

Option B

This incorrectly states that basic prices exclude all taxes. Basic prices exclude product taxes but include other taxes on production (net of production subsidies).

Option D

This reverses the relationship. Factor cost was used in the old series; basic prices are used in the new series (2011-12 base).

Q11Indian EconomyNational Income Accounting

The 'Economic Census' conducted in India provides data on:

  • AOnly GDP and national income figures
  • BThe geographical distribution and characteristics of all entrepreneurial units in the countryCorrect
  • COnly the population count and demographic details
  • DOnly agricultural production and land use patterns

Explanation

Correct. The Economic Census is a complete count of all establishments/entrepreneurial units (other than crop production and plantation) in the country. It provides data on the number, type, and characteristics of enterprises, their employment, and geographical distribution. The 7th Economic Census (2019) was conducted by MoSPI and used digital technology for enumeration.

Why the other options are incorrect
Option A

GDP and national income are estimated by NSO using multiple data sources. The Economic Census provides input data but not GDP figures directly.

Option C

Population count and demographics are covered by the Population Census conducted by the Registrar General of India, not the Economic Census.

Option D

Agricultural production data comes from crop production estimates and agricultural census, not the Economic Census.

Q12Indian EconomyNational Income Accounting

The relationship between Gross National Disposable Income (GNDI) and GNP is:

  • AGNDI = GNP - Depreciation
  • BGNDI = GNP + Net current transfers from abroadCorrect
  • CGNDI = GNP - Net indirect taxes
  • DGNDI = GNP + Net capital transfers from abroad

Explanation

Correct. Gross National Disposable Income (GNDI) = GNP + Net current transfers from the rest of the world. Current transfers include remittances from workers abroad, grants, gifts, and donations. GNDI represents the total income available to a nation's residents for consumption and saving, including transfer receipts from abroad.

Why the other options are incorrect
Option A

GNP minus depreciation gives NNP (Net National Product), not GNDI.

Option C

GNP minus net indirect taxes gives GNP at factor cost, not GNDI.

Option D

Capital transfers affect the capital account, not disposable income. GNDI uses current transfers, not capital transfers.

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