National Income: Chapter test

On 27 February 2026 MoSPI released the new series of GDP with base year 2022- 23, replacing the 2011-12 series that had been in use since January 2015. MoSPI's September 2026 release on Sources and Methods describes it as the eighth base year revision of India's national accounts, and notes that the series was updated on 31 August 2026 to incorporate the new Producer Price Index and Index of Industrial Production released in June 2026. The back series, re-estimating earlier years on the new methodology, is expected by December 2026. 2017-18 to 2021-22 were rejected because of the GST rollout and the COVID-19 pandemic; 2020-21 was a pandemic year, and 2023-24 was not chosen because the Advisory Committee found 2022-23 to be a normal year with the key survey data available.

MoSPI's press note on the 2022-23 series reports per capita income as per capita net national income (NNI) at current prices, that is, NNI divided by the estimated population of the year. It uses NNI because national income is the income accruing to residents after allowing for the wear and tear of capital: GNI = GDP + net primary income from the rest of the world, and NNI = GNI - consumption of fixed capital. It uses current prices because the series is meant to show income in the money of the year, although MoSPI also tabulates constant-price figures for growth comparisons. Per capita GDP is a production measure widely used in international comparisons, but it is not India's official 'per capita income'. GVA at basic prices is an industry- level output measure, and GNDI adds current transfers such as remittances, which are not part of national income.

MoSPI's FAQ on the new series answers each point. The chosen year must be a normal year, with no major economic shocks, so that it reflects the real structure of the economy; 2022-23 was recommended by the Advisory Committee on National Accounts Statistics (ACNAS) because it met this test and the important survey data needed for estimating national income were available for it. Years between 2017-18 and 2021-22 could not be used because of the GST rollout, which needed time for consolidation, and the COVID-19 pandemic. On frequency, the FAQ says that under normal conditions MoSPI's endeavour is to revise the base year every five years, as per international recommendation. This is a change from the older practice of roughly decennial revisions; the 2011-12 series lasted about eleven years before being replaced.

MoSPI's FAQ on the August 2026 update with the new PPI and IIP explains that the IIP measures changes in the physical volume of a fixed, sample-based basket of items with weights set at a point in time. Being a volume index of output, its growth is comparable with growth in gross value of output at constant prices rather than with GVA, because GVA also subtracts intermediate consumption, which under double deflation is deflated separately. MoSPI adds that minor differences arise because GVA incorporates the unincorporated sector and a dynamic input-output structure, whereas the IIP has fixed weights and fixed reporting units. Manufacturing GVA at current prices mixes price change into the comparison, the IPD is a price measure, not a volume measure, and economy-wide GVA covers agriculture and services that the IIP does not.

CSO's National Accounts Statistics: Sources and Methods 2007 traces the history. The Government of India appointed the National Income Committee in 1949 under P.C. Mahalanobis, with D.R. Gadgil and V.K.R.V. Rao as members; its first and final reports came in 1951 and 1954. The CSO then took over the work and published its first official estimates, with base year 1948-49, in 1956 in a publication titled 'Estimates of National Income', later called the conventional series. Statement 3 is wrong: successive bases (1960-61, 1970-71, 1980-81, 1993- 94) were roughly a decade apart and, for the earlier ones, synchronised with the decennial Population Census, the source of workforce data; only after NSS workforce surveys were adopted did bases move at shorter steps (1993-94, 1999-2000, 2004-05), and the 2011-12 series then lasted until 2026.

MoSPI's FAQ on the new series explains that government output is not sold, so it is valued at cost: compensation of employees + intermediate consumption + consumption of fixed capital. Subtracting intermediate consumption gives GVA = compensation of employees + CFC, and subtracting CFC leaves net value added equal to compensation of employees, which the production-approach discussion paper states directly (no operating surplus is imputed for non-market output). This is why the new series' changes in pension treatment and the imputation of government housing given in lieu of HRA directly change government value added. Interest on public debt is property income paid to lenders; it is a distributive flow, not a cost of producing government services, so it is not part of government value added. Statements 1 and 2 are correct.

MoSPI's Sources and Methods (September 2026) explains that institutional units were re-examined: general government units that consistently cover costs and make profits were moved to public corporations as market producers, while market producers whose revenues stayed well below expenses for several years were reclassified as non-market producers in general government. 'Accordingly', it says, government financing to FCI has been treated as a social transfer in kind as part of GFCE, and the GFCE chapter lists this among the major methodological changes. In the 2011-12 series, by contrast, the 2015 methodology note listed the food subsidy to FCI among product subsidies (Annexure VII). So statement 3 describes the old treatment, not the new one. The change shifts food subsidy from the GVA- GDP bridge to government consumption on the expenditure side.

MoSPI's FAQ lists both of the first two changes. Earlier, the household sector was estimated using growth rates between surveys or proxy indicators (the 2011-12 series used the Effective Labour Input method); now actual level estimates come from the annual ASUSE and PLFS, with GST data used for cross-checks. For multi-activity companies, all output used to be placed under the main business for want of detail; with new MCA data (forms MGT-7/7A) companies report the revenue from each activity, so GVA can be split properly across industries. Statement 3 is the reverse of the truth: MoSPI states that single deflation has been completely eliminated in the new series, and manufacturing now uses double deflation with item-level PPIs, the new PPI (base 2022-23) having been incorporated in the August 2026 update.

Tax collections are buoyant: they rise faster than GDP in good years and fall faster in slow years. So a falling tax-to-GDP ratio usually signals slowing growth (1 correct). Statement 2 is wrong because the ratio says nothing about how income is shared among people; that needs measures such as the Gini coefficient. The answer is (a).

India's combined tax-GDP ratio is around 17–18%, low compared with many developed economies, partly because of a large informal sector. Notice how GST and better compliance aim to widen the tax base without raising rates.

Answer as per the official UPSC answer key.

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Money value of final goods and services is correct per UPSC's key (d), though it is a simplified definition. National income is measured as the money value of all final goods and services produced in a year; counting only final goods avoids double counting of intermediate goods. Strictly, national income is Net National Product at factor cost, which also adds net factor income from abroad and subtracts depreciation, so (d) is the best of the options, not a perfect definition. (a) is partly right but vague. (b) is wrong: it leaves out government spending and net exports. (c) is wrong: personal income excludes retained profits and taxes.

Notice the update: India's GDP series is being moved to a 2022–23 base year. Trap: (b) misses two parts of C + I + G + (X − M).

Answer as per the official UPSC answer key.

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