A firm's data for a year (Rs lakh): sales to domestic buyers 700, sal…

A firm's data for a year (Rs lakh): sales to domestic buyers 700, sales to buyers abroad 200, inventories at the beginning of the year 100, inventories at the end of the year 160, intermediate goods used 350, depreciation 40. What is the net value added of the firm?

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Rs 570 lakh

Given:

Sales to domestic buyers = 700

Sales to buyers abroad = 200

Opening inventories = 100

Closing inventories = 160

Intermediate goods used = 350

Depreciation = 40

Gross value added = sales + change in inventories − intermediate goods. Net value added = GVA − depreciation.

Sales = 700 + 200 = 900

Change in inventories = 160 − 100 = 60

GVA = 900 + 60 − 350 = 610

NVA = 610 − 40 = Rs 570 lakh

Sales abroad are exports and count as sales.

Option (3) Rs 370 lakh — leaves out the exports.

Option (4) Rs 610 lakh — 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) (2.1)
Equation (2.1) has been derived by using: Change in inventories of a firm during a year ≡ Production of the firm during the year – Sale of the firm during the year. 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) …”