Read this article to learn about the top seventeen frequently asked questions on Economic Growth Trends in India.

Q. 1. What is macroeconomic environment?

Ans. Macroeconomic environment of business has broad reference to the broad charac­teristics of the economic system in which firms attempt to carry out their activities.

It refers to the institutional framework of the environment in which fundamental economic problems are solved.


Q.2. What are the essential elements of macroeconomic environment?

Ans. The four essential components of macroeconomic environment are:

(i) Economic system,

(ii) Anatomy of the economy,


(iii) National economic planning, and

(iv) Economic policy instruments.

Q.3. What is meant by an economic system?

Ans. An economic system includes laws, rules and regulations, to influence what is produced, how it is produced and who gets it. Thus, the economic system refers to the totality of arrangement that the members of the commu­nities have to make for the satisfaction of their wants.


Q.4. What is meant by a mixed economy?

Ans. A mixed economy is characterised by the existence of both public and private sectors. However, the growth of the private sector is controlled or regulated by the government; price mechanism also operates. At the same time, administered prices rule. As all these features are present in the Indian economy, it is called a mixed economy.

Q.5. What is meant by the structure of an economy?

Ans. It refers to an interrelationship between different sectors of the economy, i.e., primary, secondary and tertiary sectors. These three sectors constitute the structure of an economy.

Q.6. What is meant by less developed country?


Mention the features of an underdeveloped economy.


Indicate four characteristics of a less developed country.


Ans. The term undeveloped economy is a relative concept.

However, a less developed economy has the following distinguishing characteristics:

(a) Low per capita income;

(b) Significant dependence on the primary sector, mainly agriculture;


(c) Utilization or under-utilisation of resources;

(d) Rapid growth of population;

(e) Vast unemployment problem.

Q.7. Which country has the highest per capita income?


Ans. The highest per capita income nation is Norway. Its per capita income was $ 66,530 in 2006.

Q.8. At present, how much is India’s national income and per capita income?

Ans. India’s national income in 2007-08 stood at Rs 27,67,682 crore at 1999-2000 prices. Per capita income of an average Indian at that time came to Rs 24, 32-1 p.a. or Rs 2,027 p.m.

Q.9. Which method is used to measure India’s national income?

Ans. To measure national income, the National Income Committee uses commodity flow approach and incomes received approach. In agriculture and industry, the former method and in other sectors, the last method is used. However, in certain sectors, such as small enterprises both the approaches are used.

Q. 10. Mention the contribution of different economic sectors towards India’s national income.



What is the recent contribution of the service sector to India’s national income?

Ans. The shares of primary sector, secondary sector and tertiary sector towards national income in 2007-08 were 19.5 p.c., 24.9 p.c. and 55.7 p.c., respectively.

Q. 11. Mention the various causes respon­sible for the slow growth of national income in India.

Ans. Following are the causes responsible for the slow growth of national income in India:

(a) Uncertainty in agricultural output due to natural calamities, like flood or drought;


(b) Sluggishness in industrial production due to acute power crisis;

(c) Faulty planning; etc.

Q.12. Define national income.

Ans. National income is the aggregate money value of all goods and services produced in a year. Or it is the subtotal of incomes of all factor owners.

Q. 13. What is value added method? How is it calculated?

Ans. To measure the contribution to current output, the value of the intermediate materials that a firm purchases must be subtracted from the value of its own, the difference being the firm’s value added. Suppose, a farmer sells wheat of Rs 5 only to a flour mill owner. If the mill owner now sells flour to the bakery at Rs 8 only, then the mill’s value added is Rs 3 only.


Bread manufacturer, then sells it to the buyer at Rs 10 only, therefore, its value added is Rs 20 only. If all these value added of intermediate stages of bread production are summed up (i.e., Rs 5+ Rs 3 +Rs 2), the price of bread then becomes Rs. 10 only.

Q.14. What is transfer income?

Ans. Transfer income is excluded from national income since such income does not represent payment for contributing the production of goods and services. It is just the transfer of income from one pocket to another pocket.

Q. 15. What are the components of business environment in India?

Ans. The main components of Indian business environment are:

(i) Mixed economic system where public and private sectors function;


(ii) National economic planning known as indicative planning;

(iii) Replacement of inward- looking strategies of development pursued during 1950-91 by outward-looking strategy of development.

Q. 16. What is poverty line?

Ans. If a person is unable to bear the expenditure required for maintenance of nutritional norms, say daily calorie intake of 2,400 per person in rural areas and 2,100 in urban areas then he is categorized as poor man living below the poverty line. This expenditure is officially estimated at Rs 228.9 per capita per month in rural areas and Rs 264.1 in urban areas at 1993- 94 prices.

Q.17. Distinguish between GNP and GDP.

Ans. GNP is a broader concept than GDP. GDP is the market value of all goods and services produced by factors of production located and paid for in the domestic economy, even if these factors are located abroad. GNP includes GDP plus net property income from abroad. It, thus, includes income that nations earn from abroad. On the other hand, GDP is concerned with incomes generated domestically even by the foreigners.