CA Foundation · Business Economics · Indian Economy
An economy's nominal GDP rises from ₹200 lakh crore to ₹231 lakh crore in a year, while the GDP deflator rises from 100 to 110. What is the approximate growth rate of real GDP?
Real GDP growth is 5 per cent. Deflating nominal GDP of ₹231 lakh crore by 1.10 gives ₹210 lakh crore, against ₹200 lakh crore earlier. The 15.5 per cent figure is nominal growth, which wrongly includes the 10 per cent price rise.
- A15.5%
- B5.0%Correct
- C10.0%
- D4.5%
Explanation
Real GDP in the base year is 200 (deflator 100). Real GDP in the next year is 231 ÷ 1.10 = 210. Growth is (210 − 200) ÷ 200 = 5%. Option A is the nominal growth rate, which ignores the price rise, and option C is the deflator inflation.
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