Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP?

Theme

T126 Growth: GDP measurement, potential GDP, savings, structure of growth

What UPSC asks in this theme

Questions ask the GDP methodology change in 2015, whether recovery was V-shaped, potential GDP and what limits it, whether savings are the key driver of growth, and why India jumped from agriculture to services.

What to cover

• GDP base year 2011–12: factor cost to GVA at basic prices, MCA-21 data
• Potential GDP and output gap; determinants (capital, labour, productivity)
• Savings–investment link; other growth drivers
• Structural transformation: services-led growth and need for manufacturing
• COVID shock and recovery shapes

Writing the answer

• Define concepts precisely, then apply to India with data

These notes are for the whole theme, built from all 5 of its PYQs. UPSC does not publish model answers.