In recent years, which one among the following is the source of demand in the Indian economy in descending order?
- A.Private Consumption, Government Consumption, Net Exports, Gross Fixed Capital Formation
- B.Government Consumption, Private Consumption, Net Exports, Gross Fixed Capital Formation
- C.Private Consumption, Gross Fixed Capital Formation, Government Consumption, Net Exports
- D.Government Consumption, Private Consumption, Gross Fixed Capital Formation, Net Exports
Correct answer
Explanation
The correct answer is C. On the expenditure side of India's GDP, private consumption is the largest share, investment (gross fixed capital formation) comes next, then government consumption, and net exports come last.
GDP measured by expenditure is the sum of private final consumption expenditure, government final consumption expenditure, gross fixed capital formation, change in stocks and net exports. In India, household spending on goods and services makes up well over half of GDP, investment in buildings, machinery and infrastructure is roughly a third, and government consumption is around a tenth. Because India imports more than it exports, net exports are negative, so they stand at the bottom.
A is wrong because it puts net exports above investment. B is wrong because government consumption is far smaller than private consumption. D is wrong for the same reason and also ranks government spending above investment.
Exam tip: India's demand order is C > I > G > (X − M), with net exports negative.
Practice Questions
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- B.Economic recovery after the Second World War
- C.International Bank for Reconstruction and Development
- D.Establishment of a monetary system based on floating exchange rate
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- D.This is implemented only in rural areas of India.
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- D.perfect competition
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- B.Labour
- C.Capital
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