For an economy (in Rs crore): GVA at basic prices = 9,000; net product taxes = 500; net production taxes = 200; depreciation = 700; net factor income from abroad = (−) 100. What is the National Income (NNP at factor cost)?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs 8,000 crore
Given:
GVA at basic prices = 9,000
Net product taxes = 500
Net production taxes = 200
Depreciation = 700
NFIA = −100
GVA at basic prices already holds net production taxes but not net product taxes. National Income holds neither, and also leaves out depreciation.
GVA at factor cost = 9,000 − 200 = 8,800
NDP at factor cost = 8,800 − 700 = 8,100
National Income = 8,100 + (−100) = Rs 8,000 crore
Net product taxes play no part here, as they were never in GVA at basic prices. Rs 8,100 crore is NDP at factor cost, before NFIA is added.
NCERT (2026-27): “2.2.4 Factor Cost, Basic Prices and Market Prices … As stated above, now the CSO releases GVA at basic prices. Thus, it includes the net production taxes but not net product taxes. In order to arrive at the GDP (at market prices) we need to add net product taxes to GVA at basic prices.” Glossary: “Net Domestic Product (NDP) – Aggregate value of goods and services produced within the domestic territory of a country which does not include the depreciation of capital stock.” Table 2.4: Basic National Income Aggregates: “NNP at Factor Cost … It is the net domestic factor income added with the net factor income from abroad. NI = NNPMP − Net Product Taxes − Net Production Taxes = NDPFC + NFIA = NNPFC” |