why are monetary values given in 2004-2005 price rather than current price
Answers
National Income at Current Price:
It is the money value of final goods and services produced by normal residents of a country in a year, measured at the prices of the current year. For example, measurement of India’s National Income of 2013-2014 at the prices of 2013-2014
i. It is also known as ‘Nominal National Income’.
ii. It does not show the true picture of economic growth of a country as any increase in nominal national income may be due to rise in price level without any change in physical output.
So, in order to eliminate the effect of price changes, national income is also estimated at a constant price.
National Income at Constant Price:
It is the money value of final goods and services produced by normal residents of a country in a year, measured at base year price. Base Year is a normal year which is free from price fluctuations. Presently 2004-2005 is taken as the base year in India. If we measure India’s National Income of 2013-2014 at the prices of 2004-2005, then it is termed as ‘National Income at constant price’.
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