Read the passage carefully and answer the questions based on the passage:
Composition of GDP: Income Method
| S.No. | Items | Estimates (in crores) |
| 1 | Compensation for employees | 2000 |
| 2 | Rent | 20 |
| 3 | Interest | 30 |
| 4 | Royalty | 40 |
| 5 | Profit | 50 |
| 6 | Mixed income for self-employed | 1000 |
| 7 | Net factor income from abroad | -3 |
| 8 | Indirect taxes | 500 |
| 9 | Subsidies | 400 |
| 10 | Depreciation | 260 |
Calculate Operating surplus.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 140
Given:
Rent = 20
Interest = 30
Royalty = 40
Profit = 50
Operating surplus is what remains of value added after wages are paid. It goes out as rent, interest, royalty and profit:
Operating surplus = 20 + 30 + 40 + 50 = Rs. 140 crore
Compensation of employees is left out because it is the wage part. Mixed income is left out because it is shown as a separate item.
Note: The NCERT books say that rent, interest and profits are together called operating surplus. None of the NCERT books (2026-27, 2025-26, 2023-24 or pre-rationalised) mentions royalty as a factor income. Royalty is the payment for using a natural resource or a patent, and it is counted with rent.
NCERT (2026-27): “2.2 Circular Flow of Income and Methods of Calculating National Income … As we have mentioned before, there may fundamentally be four kinds of contributions that can be made during the production of goods and services (a) contribution made by human labour, remuneration for which is called wage (b) contribution made by capital, remuneration for which is called interest (c) contribution made by entrepreneurship, remuneration of which is profit (d) contribution made by fixed natural resources (called ‘land’), remuneration for which is called rent.… Introductory Macroeconomics – Chapter 2, footnote 4: In this example, we have left out factor payments in the form of rent and interest. But this will not make any difference to the basic result, because after paying wages the remainder of value added by a firm will be distributed between rent, interest and profits (together called operating surplus).” |