GVA at factor cost of an economy is Rs 5,000 crore. Production taxes are Rs 120 crore and production subsidies are Rs 20 crore. What is the GVA at basic prices?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs 5,100 crore
Given:
GVA at factor cost = Rs 5,000 crore
Production taxes = Rs 120 crore
Production subsidies = Rs 20 crore
GVA at factor cost + net production taxes = GVA at basic prices.
Net production taxes = 120 − 20 = 100
GVA at basic prices = 5,000 + 100 = Rs 5,100 crore
Rs 5,120 crore forgets to take out the production subsidies.
NCERT (2026-27): “2.2.4 Factor Cost, Basic Prices and Market Prices … The distinction between factor cost, basic prices and market prices is based on the distinction between net production taxes (production taxes less production subsidies) and net product taxes (product taxes less product subsidies). …” “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. Thus, |