Question

(a) From the following data compute net value added at factor cost:

$\begin{array}{cccccccc}\text{Items}& \text{Domestic sales}& \text{Subsidies}& \text{Purchase of raw material}& \text{Exports}& \text{Depreciation}& \text{Import of}& \text{Net}\\ & & & \text{in domestic market}& & & & \text{indirect taxes}\\ \text{In Crores}& 2500& 40& 500& 200& 100& 600& 60\end{array}$

(b) Intermediate goods and corporate tax are included in national income indirectly. How ?

OR

Calculate $GN{P}_{mp}$

(a) By Income Method

(b) Expenditure Method

$\begin{array}{ccc}\left(a\right)& \text{Rent}& 40\\ \left(b\right)& \text{Private Final Consumption Expenditure}& 800\\ \left(c\right)& \text{Net Exports}& 20\\ \left(d\right)& \text{Interest}& 60\\ \left(e\right)& \text{Profit}& 120\\ \left(f\right)& \text{Government Final Consumption Expenditure}& 200\\ \left(g\right)& \text{Net Domestic Capital Formation}& 100\\ \left(h\right)& \text{Compensation of Employees}& 800\\ \left(i\right)& \text{Depreciation}& 20\\ \left(j\right)& \text{Net Indirect Taxes}& 100\\ \left(k\right)& \text{Net Factors Income From Abroad}& (-)20\end{array}$

Answer 1

(a) Value of output = Domestic Sales + Exports + Change in stock =
(2500 + 200) + 0 = 2700

$GV{A}_{mp}$ = Value of output - Intermediate consumption
= 2700 - (500 + 600) = Rs. 1600

$NV{A}_{fc}=GV{A}_{mp}$ - NIT - Dep. = 1600 - 60 - 100 = 21440

(b) Intermediate goods are included in National income by the way of final goods. Final goods include the value of intermediates, and the value of final goods is included in national income.

Also, corporate tax is a part of profits. Profits are the factor income of an entrepreneur in return of his productive services. Corporate tax is included in national income as a part of profits.

OR

By Income Method :

$ND{P}_{fc}=a+d+e+h=40+60+120+800=Rs.1020$

$GN{P}_{mp}=ND{P}_{fc}+Dep.+NFIA+NIT=1020+20+(-20)+100=Rs.1120$

By Expenditure Method :

$GD{P}_{mp}=b+c+f+g+i=800+20+200+100+20=Rs.1140$

$GN{P}_{mp}=GD{P}_{mp}+NFIA=1140+(-20)=Rs.1120$