The growth rate of per capita income at current prices is higher than that of per capita income at constant prices, because the latter takes into account the rate of:
✓ Correct answer: b) increase in price level
ExplanationThe growth rate of per capita income at current prices is higher than at constant prices because the latter accounts for inflation.Current price per capita income mea- sures total income without adjusting for inflation, meaning it reflects nominal growth.Constant price per capita income is adjusted for inflation using a base year price index, giving a more accurate picture of real income growth.Since inflation increases the price of goods and services over time, the differ- ence between nominal and real per capita income growth is due to rising price levels.For example, if nominal per capita income grows by 10% and inflation is 5%, the real (constant price) per capita income would only increase by 5% after ad- justing for inflation.For 2023-24, India’s per capita income was around ₹2.12 lakh at current prices and much lower around ₹1.15 lakh at constant prices, as per MoSPI.The gap between nominal and real growth reflects the impact of inflation, driven by rising commodity prices and global uncertainties.287
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