UPSC Prelims Practice Questions — Double deflation debate over GDP methodology is no ‘great battle’
Q1. In national accounts, the technique known as 'double deflation' is best described as which one of the following?
- A. Deflating gross output by a single price index and then adjusting the outcome for changes in an industry's terms of trade
- B. Deflating gross value added twice, first by a producer price index and then by a consumer price index, to strip residual price effects
- C. Deflating gross output and intermediate consumption separately by distinct price indices, real value added being the difference
- D. Deflating the current-year and base-year output of an industry by one common price index to build a chain-linked volume series
Q2. With reference to the double deflation method in national accounts, consider the following statements:
1. Real gross value added is obtained as the difference between the volume estimate of output and the volume estimate of intermediate consumption.
2. The method is feasible only where the volume measures used are additive, such as those computed on a Laspeyres formula at previous year's prices.
3. It is recommended in particular for activities in which input and output prices and volumes fluctuate widely relative to each other.
4. India's 2011-12 base-year series applied it to the manufacturing sector, using the Wholesale Price Index for both output and inputs.
Which of the statements given above is/are correct?
- Real gross value added is obtained as the difference between the volume estimate of output and the volume estimate of intermediate consumption.
- The method is feasible only where the volume measures used are additive, such as those computed on a Laspeyres formula at previous year's prices.
- It is recommended in particular for activities in which input and output prices and volumes fluctuate widely relative to each other.
- India's 2011-12 base-year series applied it to the manufacturing sector, using the Wholesale Price Index for both output and inputs.
- A. 1 and 4 only
- B. 2, 3 and 4 only
- C. 1, 2 and 3 only
- D. 1, 2, 3 and 4
Q3. Which one of the following statements correctly identifies the body that compiles India's new series of national accounts with base year 2022-23?
- A. NITI Aayog, which has taken over the entire work of national income estimation from the Ministry of Statistics and Programme Implementation
- B. The National Statistical Office, the statistics wing of the Ministry of Statistics and Programme Implementation
- C. The Reserve Bank of India, which alone fixes the base year for every national accounts aggregate in the country
- D. The Office of the Economic Adviser, DPIIT, which is the sole compiler of all national accounts aggregates for India
Q4. With reference to India's new series of national accounts released in February 2026, consider the following statements:
1. GDP for the base year 2022-23 is estimated at about ₹261 lakh crore.
2. Real GDP for 2024-25 is placed at about ₹300 lakh crore, implying a growth of 7.1 per cent.
3. The series it replaced had 2011-12 as its base year.
4. Double deflation has been introduced for the manufacturing sector, while agriculture continues to be measured by single deflation.
Which of the statements given above is/are correct?
- GDP for the base year 2022-23 is estimated at about ₹261 lakh crore.
- Real GDP for 2024-25 is placed at about ₹300 lakh crore, implying a growth of 7.1 per cent.
- The series it replaced had 2011-12 as its base year.
- Double deflation has been introduced for the manufacturing sector, while agriculture continues to be measured by single deflation.
- A. 1 and 4 only
- B. 2 and 4 only
- C. 1, 2 and 3 only
- D. 1, 2, 3 and 4
Q5. Besides its part-time Chairperson and one ex-officio Member, how many part-time Members does the National Statistical Commission consist of?
- A. Two
- B. Three
- C. Four
- D. Six
Q6. The National Statistical Commission owes its existence to which one of the following?
- A. The Collection of Statistics Act, 2008, administered by the Ministry of Statistics and Programme Implementation
- B. A recommendation of the Finance Commission accepted by the Union Cabinet, giving it constitutional standing
- C. An Act of Parliament of 2006 enacted on the lines of the report of the Rangarajan Commission
- D. A Resolution of the Government of India of 2005, following acceptance of the Rangarajan Commission's recommendations
Q7. The new series of the Wholesale Price Index and of the Producer Price Indices with base year 2022-23 is compiled and released by which one of the following?
- A. The National Statistical Office, which is the sole compiler of every official price index in the country
- B. The Labour Bureau, which alone compiles all producer and wholesale price indices in India
- C. The Department of Statistics of the Reserve Bank of India, the exclusive authority on wholesale prices
- D. The Office of the Economic Adviser in the Department for Promotion of Industry and Internal Trade
Q8. Consider the following statements regarding Gross Domestic Product and Gross Value Added in India's national accounts:
1. GDP at market prices equals GVA at basic prices plus taxes on products less subsidies on products.
2. In the first quarter of 2026-27, real GVA grew faster than real GDP, at 8.2 per cent against 7.8 per cent.
3. In the same quarter, the primary sector grew at 8.6 per cent at constant prices, outpacing the secondary sector's 2.9 per cent.
Which of the statements given above is/are correct?
- GDP at market prices equals GVA at basic prices plus taxes on products less subsidies on products.
- In the first quarter of 2026-27, real GVA grew faster than real GDP, at 8.2 per cent against 7.8 per cent.
- In the same quarter, the primary sector grew at 8.6 per cent at constant prices, outpacing the secondary sector's 2.9 per cent.
- A. 1 and 2 only
- B. 1 and 3 only
- C. 2 and 3 only
- D. 1, 2 and 3
Q9. In the 2026 debate over India's growth estimates, much turned on the 'implicit deflator' for manufacturing turning negative. The implicit deflator of an aggregate is best described as which one of the following?
- A. A weighted average of the Wholesale Price Index and the Consumer Price Index, fixed in advance for each sector
- B. A price index selected in the base year and held unchanged for deflating that aggregate in all later years
- C. The gap between nominal and real growth of the aggregate, expressed as a share of its nominal value
- D. The ratio of the aggregate at current prices to the same aggregate at constant prices, emerging after volume estimates are compiled
Q10. The successive revisions to India's GDP estimates that have been cited in the current data-quality debate arise under which one of the following arrangements?
- A. The National Statistical Commission itself compiles the quarterly estimates and revises them before their release
- B. NITI Aayog revises the estimates prepared by the Ministry of Statistics and Programme Implementation before publication
- C. The National Statistical Office releases estimates on a pre-announced calendar, successively as advance, provisional and revised estimates
- D. The Reserve Bank of India finalises the national income estimates while releasing them in its annual report
Q11. Double deflation is the internationally recommended practice; the alternative it displaces, 'single deflation', is best described as which one of the following?
- A. Deflating output and intermediate consumption by two separate indices and averaging the resulting volume series
- B. Applying one price index to an industry's output, intermediate consumption being assumed to move in line with it
- C. Deflating value added only at each base-year revision, the intervening years being extrapolated by volume indicators
- D. Deflating current-price value added by a consumer price index constructed for the base year alone