Previous Year Question

Real Gross National Product represents the inflation-adjusted value of final goods and services produced by the residents of a country during a specified period. It also incorporates net factor income received from abroad.

GNP = GDP + Net Factor Income from Abroad

Growth in real GNP and per capita real GNP primarily measures a quantitative increase in economic output and average income. Economic development is a broader concept. It also includes improvement in employment, poverty reduction, income distribution, education, health and living standards.

If real GNP increases while poverty and unemployment also increase, the benefits of growth are not reaching a substantial section of society. Such a situation may arise when:

• Growth is concentrated in capital-intensive sectors and generates insufficient employment.

• Distribution of income and assets becomes more unequal.

• A large share of additional output and profits accrues to a limited group.

• Real income or consumption of vulnerable sections does not improve.

This situation may be described as jobless or non-inclusive growth. Therefore, an increase in GNP alone cannot demonstrate a higher level of economic development.

Examination of the options:

• Option (a): Industrial output failing to keep pace with agriculture may indicate a structural imbalance, but it does not necessarily establish the absence of development.

• Option (b): Agricultural output lagging behind industry may affect food inflation and rural income, but it is not the most direct evidence in the question.

• Option (c): Rising poverty and unemployment demonstrate that output growth has not translated into employment and human welfare. It is the correct answer.

• Option (d): Faster import growth may enlarge the trade deficit. However, imports of machinery, technology and capital goods can enhance future productive capacity; hence this is not conclusive evidence of lack of development.