It is very rare that in recent times, India's Nominal GDP is lower than Real GDP. While throwing light on reasons of the same, discuss how it affects producers, consumers and economy as a whole.
Published: March 17, 2016
It was for the first time that in June 2015 Nominal GDP was way lower than Real GDP. This was mainly due to the dichotomy between CPI (Consumer Price Index) and WPI (Wholesale Price Index). The difference between CPI and WPI is mainly because of their composition. In June 2015, there was a difference between CPI inflation and WPI inflation at around 750 basis points and this seemed to have stayed.
This affects both producers and consumers because producer is seeing deflationary forces, while consumer is seeing inflation. Therefore, such a situation can have a huge bearing on the functioning of the market forces, ultimately affecting the economy.
Model Questions Category: 060 - Economic Growth Development