CDS Economics · National Income, Growth and Development Indicators
National Income Measures
How GDP becomes GNP, NNP and national income, real against nominal GDP and the deflator, who measures it in India, and how the sectors share the output.
Why this matters
Thirteen CDS questions, seven of them HARD. Three came in CDS 2024 (I) alone. Most ask what a measure includes or leaves out, so the chain from GDP to national income pays off first.
Concept 1 of 4: From GDP to national income
GDP is the value of all final goods and services made inside the country in a year. Every other measure is GDP with something added or taken away: income earned abroad, the wear and tear of machines, and the taxes and subsidies that lift or lower market prices.
Definition
The chain:
- GDP (gross domestic product): final output produced within the domestic territory, whoever produces it. By spending, GDP = C + I + G + (X − M), so imports are subtracted.
- GNP = GDP + net factor income from abroad (NFIA). NFIA is income earned by Indians abroad minus income earned by foreigners in India. It is not part of GDP.
- NNP = GNP − depreciation (consumption of fixed capital).
- Factor cost = market price − net indirect taxes (indirect taxes − subsidies). NNP at factor cost is the national income.
- Personal income = national income − undistributed profits − corporation tax − social security contributions + transfer payments.
- Personal disposable income = personal income − direct taxes paid by households − fees and fines.
- Not counted: sale of second-hand goods (no new output), intermediate goods (counted inside the final good), transfer payments such as pensions. The change in stocks (inventories) is part of capital formation.
National income from GDP
- GDP at market prices
- net factor income from abroad
- NNP at factor cost, the national income
Worked example
A country has GDP at market prices of 500, net factor income from abroad of −10, depreciation of 40, indirect taxes of 60 and subsidies of 10 (all in thousand crore rupees). Find its national income.
Practice this conceptself-check · 4 quick reps
The same idea in a real exam question:
CDS · 2024 · CDS (I) 2024 — General Knowledge · Q75Moderate
Example 1 · National Income, Growth and Development Indicators · National Income Measures
Which one of the following statements is not correct for National Income Accounting for India?
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.
Concept 2 of 4: Real and nominal GDP, the deflator and GDP per head
If prices double and nothing else changes, GDP in rupees doubles, but the country is no richer. Real GDP removes this by valuing every year's output at the prices of one fixed base year. The ratio of the two is the GDP deflator, a price index for everything the country produces.
Definition
The terms:
- Nominal GDP: each year's output at that year's own (current) prices.
- Real GDP: each year's output at constant (base-year) prices, so years can be compared.
- GDP deflator = nominal GDP ÷ real GDP × 100. Its basket is all of current output, so the basket changes every year (a CPI uses a fixed basket). It is also a measure of inflation.
- Potential GDP: the real GDP the economy would produce with all its resources fully employed.
- Real GDP per capita = real GDP ÷ population. It rises with output per worker, the share of working-age people who work (work participation) and the share of the population of working age.
GDP deflator
Worked example
In a year a country's nominal GDP is 1,200 and its real GDP at base-year prices is 1,000. Find the GDP deflator and say what it shows.
Practice this conceptself-check · 4 quick reps
The same idea in a real exam question:
CDS · 2021 · CDS (I) 2021 — General Knowledge · Q1Moderate
Example 2 · National Income, Growth and Development Indicators · National Income Measures
Which one of the following statements is not correct ?
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.
Concept 3 of 4: Who measures national income in India
India's national accounts are built by a statistics office, not by the RBI or the Finance Ministry. It picks a base year whose prices value real output, and it runs the surveys that feed the accounts.
Definition
The facts:
- The National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI) compiles national income. The NSO was formed in 2019 by merging the CSO and the NSSO.
- In January 2015 the base year moved from 2004-05 to 2011-12, and headline growth moved to GVA at basic prices (GDP = GVA + product taxes − product subsidies). MoSPI has since announced a newer base year, 2022-23, so check which series a question means.
- The NSO's surveys include the Periodic Labour Force Survey, the Annual Survey of Unincorporated Sector Enterprises, the Survey on Social Consumption (health, education) and the Comprehensive Modular Survey (telecom, ICT skills).
- The first estimate of India's national income was made by Dadabhai Naoroji (1867-68 figures, in Poverty and Un-British Rule in India); the first scientific estimate by V. K. R. V. Rao (1931-32).
| 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. |
Practice this concept3 quick reps
The same idea in a real exam question:
CDS · 2017 · CDS (II) 2017 — General Knowledge · Q75Moderate
Example 3 · National Income, Growth and Development Indicators · National Income Measures
In India, the base year of the new GDP series has been shifted from 2004-05 to
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.
Concept 4 of 4: How the sectors share India's output
As a country grows, people move from farms to factories and offices, and output follows. In India the jump went mostly from agriculture straight to services: services now make up more than half of output, while manufacturing's share has stayed about the same.
Definition
The pattern (gross value added):
- Services: over half of GVA, up sharply since the 1990s. They also draw most of the foreign direct investment.
- Industry: about a quarter to a third; manufacturing alone about 15 to 17 per cent, broadly flat rather than falling.
- Agriculture: under a fifth of GVA and falling, yet still close to half of all workers. Its growth swings with the monsoon, so it is the most volatile sector.
- In 2020-21, the COVID year, total GVA shrank; agriculture was the sector that kept growing.
- Horticulture output (fruits and vegetables) has been larger than foodgrain output by weight for over a decade (Economic Survey 2025-26).
- India's world rank by nominal GDP: sixth in 2017 (World Bank, passing France); IMF figures for 2025 put it fourth, past the UK and Japan.
| 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 |
Practice this conceptself-check · 4 quick reps
The same idea in a real exam question:
CDS · 2026 · CDS (II) 2026 — General Knowledge · Q41Hard
Example 4 · National Income, Growth and Development Indicators · National Income Measures
Consider the following statements :
1. Services sector contributes more than 50% to India's GVA
2. Services sector growth is more volatile than agriculture sector
3. FDI in services sector contributes to three-fourth of total FDI in the post-Covid period
Which of the statements given above are correct ?
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.
Summary — formulas & gotchas at a glance
A revision cheat-sheet for the formulas and gotchas above. Click any concept name to jump back to its full explanation.
Formulas (2)
- From GDP to national income
National income from GDP
- Real and nominal GDP, the deflator and GDP per head
GDP deflator
Reference tables (2)
Who measures national income in India4 rows
| 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 output5 rows
| 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 |
Watch out for (6)
- Domestic is not national→ From GDP to national income
- Factor cost removes taxes and adds back subsidies→ From GDP to national income
- The deflator does measure inflation→ Real and nominal GDP, the deflator and GDP per head
- The RBI does not compute GDP→ Who measures national income in India
- Manufacturing did not shrink→ How the sectors share India's output
- A GDP rank needs its year→ How the sectors share India's output
Test yourself on National Income, Growth and Development Indicators
20 past CDS questions from this chapter, timed at 20 minutes and marked the way the exam marks it. You see your score and every answer the moment you finish. Free to start.