1
Identify values - Previous year = 20, Current year = 24
2
Apply formula = [(24-20)/20] ร 100
3
Calculate = (4/20) ร 100 = 20%
Answer: Inflation rate is 20%
Worked Example 2: GDP vs GNP
Problem: India's GDP = Rs. 100 lakh crore. Indians abroad earn Rs. 5 lakh crore. Foreigners in India earn Rs. 3 lakh crore. Find GNP.
1
Calculate Net Factor Income = Income by Indians abroad - Income by foreigners in India
2
Net Factor Income = 5 - 3 = Rs. 2 lakh crore
3
Apply GNP formula = GDP + Net Factor Income = 100 + 2 = Rs. 102 lakh crore
Answer: India's GNP = Rs. 102 lakh crore
Exam Shortcut: WPI vs CPI
WPI (Wholesale Price Index) = Inflation at producer level, includes raw materials
CPI (Consumer Price Index) = Inflation at consumer level, includes services
Trick: WPI = Wholesale = Producer, CPI = Consumer = Retail
#1 Most Common Mistake
Students confuse Real GDP with Nominal GDP:
โข Nominal GDP = Current year prices (includes inflation effect)
โข Real GDP = Base year prices (inflation removed)
Real GDP gives true economic growth. Always check if the question asks for real or nominal values.
Current Affairs Connection
India targets 4% inflation rate. RBI uses CPI for monetary policy decisions. Current GDP growth target is around 6-7%. These figures change frequently, so stay updated with economic surveys and budget announcements.