During a year, a firm sells goods worth Rs 1,000 crore, of which goods worth Rs 200 crore are exported. Its stock of finished goods rises from Rs 100 crore to Rs 150 crore. It uses up raw materials worth Rs 350 crore, and depreciation is Rs 30 crore. What is its net value added?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs 670 crore
Given:
Sales = Rs 1,000 crore, of which exports = Rs 200 crore
Stock of finished goods: Rs 100 crore → Rs 150 crore
Raw materials used = Rs 350 crore
Depreciation = Rs 30 crore
Gross value added = sales + change in inventories − intermediate goods used. Exports are part of sales. Net value added = GVA − depreciation.
Change in inventories = 150 − 100 = 50
\( \displaystyle GVA = 1{,}000 + 50 - 350 = 700 \)
\( \displaystyle NVA = 700 - 30 = 670 \)
Net value added is Rs 670 crore.
Option (2) Rs 470 crore — subtracts the exports (Rs 200 crore), which wrongly leaves out goods the firm produced.
Option (4) Rs 700 crore — this is gross value added.
NCERT (2026-27): “2.2.1 The Product or Value Added Method … Taking cognizance of change of inventories we may write Gross value added of firm, i (GV Ai) ≡ Gross value of the output produced by the firm i (Qi) – Value of intermediate goods used by the firm (Zi) GV Ai ≡ Value of sales by the firm (Vi) + Value of change in inventories (Ai) – Value of intermediate goods used by the firm (Zi)” “It is worth noting that the sales by the firm includes sales not only to domestic buyers but also to buyers abroad (the latter is termed as exports). It is also to be noted that all the above mentioned variables are flow variables. Generally these are measured on an annual basis. Hence they measure value of the flows per year. Net value added of the firm i ≡ GVAi – Depreciation of the firm i (Di) …” |