Question:
Arrange the following items in descending order as percentage of GDP in India:
(1) Gross Fiscal Deficit
(2) Gross Domestic Capital Formation
(3) Central Government Debt
(4) Gross Tax Revenue
Choose the correct answer from the options given below:
(A) (3), (2), (4), (1)
(B) (2), (3), (1), (4)
(C) (3), (2), (1), (4)
(D) (2), (4), (3), (1)
Answer : (A) (3), (2), (4), (1)
The correct descending order of these items as a percentage of India’s GDP is Central Government Debt, Gross Domestic Capital Formation, Gross Tax Revenue, and Gross Fiscal Deficit.
Ranking by Percentage of GDP
Here’s an explanation of each item and its approximate recent value as a percentage of India’s Gross Domestic Product (GDP), which confirms the ranking from highest to lowest.
- (3) Central Government Debt
- Approximate Value: ~ 55-60% of GDP.
- What it is: This is the total accumulated debt or outstanding borrowings of the central government over many years. As a “stock” variable, it is naturally the largest figure.
- (2) Gross Domestic Capital Formation
- Approximate Value: ~ 30-34% of GDP.
- What it is: This represents the total investment in physical assets (like machinery, buildings, and infrastructure) within the country in a given year. It’s a key measure of economic growth potential.
- (4) Gross Tax Revenue
- Approximate Value: ~ 11-12% of GDP.
- What it is: This is the total tax collected by the central government (like income tax, corporate tax, and GST) in a financial year, before any funds are devolved to the states.
- (1) Gross Fiscal Deficit
- Approximate Value: ~ 5.5-6.5% of GDP (in recent years).
- What it is: This is the shortfall in the government’s total income compared to its total spending in a single year, which needs to be covered by borrowing. It is the smallest of the four figures.