CDS Economics · Formula sheet

National Income, Growth and Development Indicators formulas

5 formulas, 15 reference tables and 31 common traps for CDS Economics National Income, Growth and Development Indicators, grouped by subtopic.

Full notes with worked examples

National Income Measures

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From GDP to national income

National income from GDP

\text{NNP}_{FC} = \text{GDP}_{MP} + \text{NFIA} - \text{Depreciation} - (\text{Indirect taxes} - \text{Subsidies})

$\text{GDP}_{MP}$ GDP at market prices
$\text{NFIA}$ net factor income from abroad
$\text{NNP}_{FC}$ NNP at factor cost, the national income

Real and nominal GDP, the deflator and GDP per head

GDP deflator

\text{GDP deflator} = \dfrac{\text{Nominal GDP}}{\text{Real GDP}} \times 100

Who measures national income in India

Item	Fact
Compiled by	National Statistical Office (MoSPI)
Base year since 2015	2011-12 (was 2004-05)Q CDS 2017 (II): the new series moved the base year to 2011-12.
Headline measure in the new series	GVA at basic prices
NSO household and enterprise surveys	PLFS, unincorporated enterprises, social consumption (health), modular survey on telecom and ICT skillsQ CDS 2025 (II): all four of these surveys are MoSPI's.

How the sectors share India's output

Claim	True or false	Holds for
Services make up more than half of India's GVA	True	2010s to nowQ
The share of services has fallen	False: it has risen sharply	Since the 1990sQ CDS 2016 (II): the share of services increased sharply.
Services growth is more volatile than farm growth	False: farm growth is the volatile one	Monsoon years
Horticulture output is larger than foodgrain output	True	Economic Survey 2025-26Q CDS 2026 (II) asked this from the Economic Survey 2025-26.
India is the sixth largest economy, just ahead of France	True then	World Bank data for 2017; India has since moved up to fourth (IMF, 2025)Q

Common traps

Domestic is not national

GDP counts output made inside the country. Income Indians earn abroad enters only when you move to GNP, by adding net factor income from abroad.

Factor cost removes taxes and adds back subsidies

Going from market price to factor cost, subtract indirect taxes and add subsidies. Subtracting subsidies too is the usual slip.

The deflator does measure inflation

The GDP deflator is a price index, and deflator-based inflation is reported beside CPI and WPI. A statement that it gives real GDP 'but not the inflation rate' is wrong.

The RBI does not compute GDP

National income comes from the NSO under MoSPI. The RBI publishes money and banking data, not the national accounts.

Manufacturing did not shrink

The share that fell is agriculture's. Manufacturing's share has stayed roughly flat; services rose.

A GDP rank needs its year

India was sixth in 2017, fifth by about 2021 and fourth in IMF figures for 2025. Answer a ranking question for the year the stem names.

Macroeconomic Theory

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Classical economics and Keynes

Idea	Who or what	Meaning
Unemployment is temporary	Classical school	Flexible wages and prices restore full employmentQ CDS 2016 (II): classical theory treats departures from full employment as purely temporary.
Employment depends on effective demand	J. M. Keynes	Aggregate demand meets aggregate supplyQ
Deficit financing	J. M. Keynes	Spend beyond revenue to lift demand in a slumpQ CDS 2022 (I): Keynes first mooted deficit financing.
Recessionary gap	Output below potential	Resources lie idleQ
Crowding in	Public investment	Raises private investmentQ CDS 2026 (II): crowding in is public investment leading to more private investment.

Later ideas and their authors

Idea	Author
Natural rate of unemployment	Milton Friedman (and Edmund Phelps)Q
Phillips curve	A. W. Phillips
Relative income hypothesis	James Duesenberry
Life cycle hypothesis	Franco Modigliani, Albert Ando, Richard BrumbergQ CDS 2019 (I): consumption depending on resources, the return on capital and age is the life cycle hypothesis.
Permanent income hypothesis	Milton Friedman
Capitalism underdeveloped the periphery by not exploiting it enough	Geoffrey KayQ

The economic curves

Curve	Plots
Lorenz curve	Inequality of income or wealthQ CDS 2019 (II): the Gini coefficient measures income inequality.
Phillips curve	Inflation and unemployment
Engel curve	Income and the share spent on food
Laffer curve	Tax rate and tax revenue
45-degree line	X equals Y, with both in the same unitQ
Credit to GDP ratio	Position in the financial cycleQ CDS 2025 (II): credit to GDP, not the fiscal deficit, tracks the financial cycle.

Common traps

Effective demand, not aggregate demand alone

For Keynes, employment is fixed by effective demand: the point where the aggregate demand and aggregate supply schedules meet. Aggregate demand by itself is the distractor.

Crowding in is the opposite of crowding out

Crowding out: public borrowing displaces private investment. Crowding in: public investment raises private investment. Lower private borrowing or a smaller fiscal deficit is not crowding in.

Phillips drew the curve, Friedman limited it

The natural rate idea came from Friedman and Phelps, as a criticism of the long-run Phillips curve. Phillips and Lipsey are the names of the original curve.

Deepening is per worker

Capital deepening raises capital per worker. Adding capital just to equip new workers, with the ratio unchanged, is capital widening.

The Gini measures inequality, not poverty

A country can have a low Gini and many poor people if nearly everyone is poor. The Gini is about how evenly income is shared, not how much there is.

Phillips is inflation, Laffer is tax

Phillips: inflation and unemployment. Laffer: tax rate and tax revenue. Engel: income and food spending. Swapping these is the match-list trap.

Employment and Unemployment

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Labour force rates and the PLFS

Unemployment rate from LFPR and WPR

\text{UR} = \dfrac{\text{LFPR} - \text{WPR}}{\text{LFPR}} \times 100

$\text{LFPR}$ labour force participation rate, per cent of population
$\text{WPR}$ worker population ratio, per cent of population

Kinds of unemployment

Kind	Cause	Example
Frictional	Changing or searching for a job	A graduate waiting for the first offer
Structural	Skills or places do not match the vacancies; new technology	Typists after computers spreadQ CDS 2021 (I): a mismatch between vacancies and available workers is structural unemployment.
Cyclical	A fall in total demand	Factory layoffs in a recession
Disguised	Too many hands on one job	Seven family members on a farm that needs four
Seasonal	Work only in one season	Farm labour after the harvest

The demographic dividend

Term	Meaning
Demographic dividend	Growth from a higher share of working-age peopleQ Asked twice: CDS 2017 (II) and 2019 (II).
Working-age population	People aged about 15 to 64
Dependency ratio	Children and old people for each person of working age

Common traps

Disguised workers look employed

Disguised unemployment is invisible: the people are at work, but removing them would not cut output. It is not the same as being openly without a job.

Unemployment rate is out of the labour force

With LFPR 60 and WPR 54, the unemployment rate is 6 ÷ 60 = 10 per cent, not 6 per cent. The 6 is a share of the population.

It is about the age mix, not the total

The dividend comes from more working-age people relative to dependants. A sharp fall in total population or a rise in the sex ratio is not what it means.

Poverty and Its Measurement

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The Multidimensional Poverty Index

Multidimensional Poverty Index

\text{MPI} = H \times A

$H$ headcount ratio: share of the population that is poor
$A$ intensity: average share of weighted indicators in which the poor are deprived

Poverty lines and the committees

Year	Body	Key point
1901	Dadabhai Naoroji	First estimate of a poverty lineQ
1979	Alagh Task Force	2,400 calories rural, 2,100 urbanQ
1993	Lakdawala Committee	State-wise calorie-based lines, uniform reference period
2009	Tendulkar Committee	No calorie anchor; urban basket as reference; mixed reference period; 21.9 per cent poor in 2011-12Q CDS 2024 (I): Tendulkar used the all-India urban basket as the reference, and did not anchor to calories.
2014	Rangarajan Committee	Food plus normative non-food plus behavioural non-food; 29.5 per cent poor in 2011-12Q

Anti-poverty schemes

Scheme	Key fact
MGNREGA, 2005	100 days of unskilled manual work a year for a rural householdQ Asked twice: CDS 2020 (I) and 2022 (I). The work is unskilled, and only in rural areas.
Universal Basic Income	Cash to every citizen; Economic Survey 2016-17Q

Common traps

Rural calories are higher, not lower

The norm is 2,400 calories in rural areas and 2,100 in urban areas, because rural work is more physical. Options often swap the two.

Tendulkar moved away from calories

The Tendulkar Committee dropped the calorie anchor and added health and education spending. 'Anchored to the official calorie norm' describes the older method.

Years of schooling, not literacy

The MPI's education indicators are years of schooling and school attendance. Literacy rate, life expectancy and income per head are not MPI indicators.

100 days, unskilled, rural

MGNREGA guarantees 100 days (not 150 or 175) of unskilled manual work, only in rural areas, at equal wages for women and men.

UBI is universal

The U in UBI stands for Universal: everyone gets it, with no conditions. 'Unconditional' describes it but is not what the letter stands for.

Human Development and Global Indices

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The Human Development Index

Human Development Index

\text{HDI} = \left(I_{\text{health}} \times I_{\text{education}} \times I_{\text{income}}\right)^{1/3}

$I$ dimension index: (actual − minimum) ÷ (maximum − minimum)

The idea of human development

Item	Fact
Concept of human development	Mahbub ul Haq, first Human Development Report 1990Q
Four pillars	Equity, sustainability, productivity, empowermentQ CDS 2023 (II): security is not one of the pillars.
Basic needs approach	Proposed by the ILO; six needs from health to housingQ
Capability approach	Amartya Sen
Gross National Happiness	Bhutan, the only country to adopt it officiallyQ

Gender, health and social spending

Measure	Fact
Gender Inequality Index	Reproductive health, empowerment, labour market; 0 means equalityQ
Infant mortality, India	About 28 per 1,000 live births (2020); not comparable to China, the USA or Sri LankaQ
Life expectancy, India	Female above male; urban above ruralQ CDS 2022 (II): male life expectancy above female is what you would not see.
Education spending, 2014 to 2019	About 3 per cent of GDP, stagnantQ

Global indices and India's rank

Index	Published by	India, with year
Global Competitiveness Index	World Economic Forum	Three sub-indices in 2016-17; no life expectancy sub-indexQ
Ease of Doing Business	World Bank (stopped 2021)	142 in 2014 to 63 in 2019; registering property worsenedQ
Global Innovation Index	WIPO	81 in 2015, 40 in 2023, 39 in 2024Q Asked twice: CDS 2024 (I) and 2025 (II).
SDG India Index	NITI Aayog	2020-21 bottom three: Bihar, Jharkhand, AssamQ

Common traps

Haq built it, Sen shaped the idea

The concept of human development and the HDI are credited to Mahbub ul Haq. Amartya Sen gave the capability approach behind it. A 'who gave the concept' question wants Haq.

Mortality is not an HDI indicator

Health enters the HDI only through life expectancy at birth. Mortality rate, infant mortality and access to banking are not indicators of the index.

Order ranks with the report's year

In the 2019 report the order was Germany (4), USA (15), South Africa (113), India (129). In the 2023-24 report the BRICS ran Russia (56), China (75), Brazil (89), South Africa (110), India (134). India was 130th in the 2025 report.

Property and income are not GII dimensions

The GII's three dimensions are reproductive health, empowerment and the labour market. Work participation enters only inside the labour market; property and income are not dimensions.

A rank is true only for its year

India's Global Innovation Index rank was 81 in 2015 and 39 in 2024. A ranking statement must be checked against the report the question names.

Overall rank up, one parameter down

India's Ease of Doing Business rank improved overall, yet its registering property rank got worse. Do not assume every parameter moved with the total.

Industrial Policy

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The IIP and the eight core industries

Core industry	Weight in the core index (per cent)
Refinery products	28.04
Electricity	19.85
Steel	17.92
Coal	10.33
Crude oil	8.98
Natural gas	6.88Q CDS 2018 (I): natural gas was the core industry with negative growth in 2015-16.
Cement	5.37
Fertilizers	2.63

Maharatna, Navratna and Miniratna companies

Company	Status	Note
Coal India Limited	Maharatna	World's largest coal producer; headquarters Kolkata, not RanchiQ
IndianOil Corporation	Maharatna	Oil refining and marketing
GAIL (India)	Maharatna	Natural gas
Bharat Petroleum	Maharatna	Upgraded in 2017
Bharat Electronics	Navratna	Defence electronics

Industrial schemes and missions

Scheme	Year	Aim
Invest India	2009	National investment promotion and facilitation agency; non-profit joint ventureQ
Make in India	2014	Investment, innovation, skills, manufacturing infrastructureQ CDS 2019 (II): launched in 2014, not 2018.
Startup India Fund of Funds 2.0	2025	About ₹10,000 crore for deep-tech startups, run through SIDBIQ
Atmanirbhar Bharat	2020	Manufacturing and exports; foreign investment in domestic productionQ
PM MITRA	2021	Integrated textile and apparel parks

Common traps

Two different bodies

The IIP comes from the NSO under MoSPI; the core industries index comes from the Office of the Economic Adviser in DPIIT. Do not give both to one office.

Primary goods outweigh capital goods

In the use-based IIP, primary goods (mining, electricity and the like) weigh about 34 per cent; capital goods only about 8.

Coal India sits in Kolkata

Coal India's headquarters is in Kolkata, West Bengal. Ranchi hosts one of its subsidiaries (Central Coalfields), which is the usual distractor.

SIDBI runs the startup fund, not NITI Aayog

The Fund of Funds for Startups is operated through SIDBI. NITI Aayog is a policy think tank and runs no such fund.

Old sectors are not sunrise sectors

Sunrise sectors are new and fast-growing. Manufacturing, textiles and services as a whole are long-established, so they are not the answer.

National Income, Growth and Development Indicators formulas

National Income Measures

From GDP to national income

Real and nominal GDP, the deflator and GDP per head

Who measures national income in India

How the sectors share India's output

Common traps

Macroeconomic Theory

Classical economics and Keynes

Later ideas and their authors

The economic curves

Common traps

Employment and Unemployment

Labour force rates and the PLFS

Kinds of unemployment

The demographic dividend

Common traps

Poverty and Its Measurement

The Multidimensional Poverty Index

Poverty lines and the committees

Anti-poverty schemes

Common traps

Human Development and Global Indices

The Human Development Index

The idea of human development

Gender, health and social spending

Global indices and India's rank

Common traps

Industrial Policy

The IIP and the eight core industries

Maharatna, Navratna and Miniratna companies

Industrial schemes and missions

Common traps

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