Question 1

Advance estimates represent the final and unchangeable GDP figures for the year.

Accepted Answer

Advance estimates are preliminary projections based on partial-year data and are subject to multiple subsequent revisions (Provisional, First Revised, Second Revised, etc.) as more data becomes available.

Question 2

Real GDP is the figure used to calculate fiscal deficit targets in the Union Budget.

Accepted Answer

Nominal GDP is strictly used as the denominator for fiscal deficit and tax buoyancy calculations.

Question 3

Consider the following statements regarding the First Advance Estimates (FAE) of National Income: 1. They are compiled by the National Statistics Office (NSO) using the Benchmark-Indicator method. 2. The FAE system was introduced in 2016-17 to align with the advancement of the Union Budget presentation to February 1. 3. Nominal GDP estimates from the FAE are used as the denominator to calculate the fiscal deficit target in the Union Budget. How many of the above statements are correct?

Accepted Answer

(c) All three — Statement 1 is correct; the NSO uses the Benchmark-Indicator method to extrapolate 7-8 months of data. Statement 2 is correct; it was introduced in 2016-17 when the Budget date was advanced. Statement 3 is correct; Nominal GDP (at current prices) forms the mathematical base for calculating the fiscal deficit as a percentage of GDP.

Question 4

Match List I (Macroeconomic Terms) with List II (Characteristics): List I: A. Real GDP, B. Nominal GDP, C. Private Final Consumption Expenditure, D. Gross Value Added at Basic Prices. List II: 1. Evaluated at current market prices including inflation, 2. Output minus intermediate consumption plus production taxes minus production subsidies, 3. Represents household spending on final goods and services, 4. Evaluated at constant base year prices to show true volume growth. Select the correct code.

Accepted Answer

(a) A-4, B-1, C-3, D-2 — Real GDP (A) uses constant base year prices (4). Nominal GDP (B) uses current market prices (1). PFCE (C) measures household expenditure on goods and services (3). GVA at Basic Prices (D) is calculated as gross output minus intermediate consumption, adjusted for production taxes and subsidies (2).

Question 5

Assertion (A): The Union Government relies on Nominal GDP rather than Real GDP to project tax revenue growth and fiscal deficit in the upcoming Budget. Reason (R): Nominal GDP incorporates prevailing inflation and reflects the actual current monetary value of transactions, which aligns with how taxes are collected and government expenditures are incurred.

Accepted Answer

(a) Both A and R are true and R is the correct explanation of A — Both statements are true. Because tax collections and government spending occur at current market prices (which include the effects of inflation), the government must use Nominal GDP to accurately estimate fiscal metrics like tax buoyancy and the fiscal deficit ratio. Therefore, R correctly explains A.

First Advance Estimates of GDP for FY 2025-26 Released

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