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Economics · 2023 · 6 marks
CBSE 2023 · Region 3 · Set 1 · Q17
Read the following text carefully: In India, after Covid-19 period, household and private sector consumption, as measured by Private Final…
Read the following text carefully :
In India, after Covid-$\displaystyle 19$ period, household and private sector consumption, as measured by Private Final Consumption Expenditure (PFCE), was ₹ $\displaystyle 39.7$ trillion in nominal terms in Q1 FY23, compared with ₹ $\displaystyle 28.4$ trillion for the same period last year, and ₹ $\displaystyle 39.2$ trillion in the fourth quarter (Q4) of $\displaystyle 2021$ – $\displaystyle 22$ (FY22).
As a percentage of Nominal GDP, PFCE was $\displaystyle 61.1$ per cent, compared with $\displaystyle 55.5$ per cent in Q1 FY22. However, in real terms at constant prices, PFCE grew just $\displaystyle 9.88$ per cent, compared with Q1 of $\displaystyle 2019$ – $\displaystyle 20$ — the year before the Covid-$\displaystyle 19$ pandemic.
“Recovery in domestic demand is reflected in the growth rates of PFCE and Gross Fixed Capital Formation (GFCF) over the corresponding quarter of the previous year,” said D.K. Srivastava. GFCF came in at ₹ $\displaystyle 19$ trillion in Q1 FY23, compared with ₹ $\displaystyle 14.4$ trillion in Q1 FY22. However, it was slightly lower than ₹ $\displaystyle 20.2$ trillion in Q4 FY22.
In the media briefing after the GDP numbers, Finance Secretary T.V. Somanathan said this trend was expected as GFCF in present Q1 was usually lower than the previous year’s Q4.
On the basis of the given text and common understanding, answer the following questions :
(a)
Compare and analyse the trends of change in PFCE as a percentage of GDP, both in real and nominal terms.
(b)
“Private Final Consumption Expenditure is an important factor determining Gross Domestic Product at Market Price.” Justify the given statement.
Marking-scheme solution
(a)
Household and private sector consumption, as measured by Private Final Consumption Expenditure (PFCE) was at ₹ $\displaystyle 39.7$ trillion in nominal term in Q $\displaystyle 1$ FY $\displaystyle 23$ compared with ₹ $\displaystyle 28.4$ trillion for the same period last year and ₹ $\displaystyle 39.2$ trillion in the fourth quarter of $\displaystyle 2021$-22. As a percentage of nominal GDP, PFCE was $\displaystyle 61.1$ %, compared with $\displaystyle 55.5$% in Q $\displaystyle 1$ FY 22. In real terms, PFCE grew just $\displaystyle 9.88$%, compared with Q1 of $\displaystyle 2019$-20.
(b)
Private final consumption expenditure (PFCE) refers to the expenditure incurred by the household sector on all types of consumer goods.
It is a measure of total amount spent by consumers on the purchase of final goods and services. Therefore, it is an important factor determining Gross Domestic product at Market Price.
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