From the following data calculate GDP at MP:
(र in crores) |
||
(i) |
Value of output in primary sector |
2,000 |
(ii) |
Intermediate consumption of secondary sector |
800 |
(iii) |
Intermediate consumption of tertiary sector |
1,000 |
(iv) |
Net factor income from abroad |
-30 |
(v) |
Net indirect taxes |
300 |
(vi) |
Value of output in tertiary sector |
1,400 |
(vii) |
Value of output of secondary sector |
1,800 |
(viii) |
Intermediate consumption of tertiary sector |
600 |
GDP at MP = Value added by Primary sector + Secondary sector + Tertiary sector
= (2000 - 1000) + (1800 - 800) + (1400 - 600) = 2800 crores.
(र in lakhs) |
||
(i) |
Sale by firm X |
100 |
(ii) |
Sale by firm Y |
500 |
(iii) |
Purchases by households from firm Y |
300 |
(iv) |
Export by firm Y |
50 |
(v) |
Change in stock of firm X |
20 |
(vi) |
Change in stock of firm Y |
10 |
(vii) |
Imports by firm X |
70 |
(viii) |
Sales by firm Z to firm Y |
250 |
(ix) |
Purchases by firm Y from X |
200 |
Precautions (Item to be included/excluded). While calculating national income by value added method, value of following items should be included:
(i) Imputed rent of owner occupied houses because all houses have rental value irrespective of its use by self or tenant.
(ii) Imputed value of goods and services produced for self-consumption or for free distribution;
(iii) Value of own-account production of fixed assets by enterprises, government and the households;
(iv) Only value added and not value of output by production units should be included;
(v) Do not include sale of second-hand goods as they are not fresh production activity. However, brokerage or commission paid to facilitate sale is included because it is a fresh production activity.
Since national income measures and reflects the current achievements of an economy during a year, value of following items should be excluded from its purview.
(i) Sales and purchases of second-hand goods. They are not a part of production of the current year. Moreover, their value had already been included in national income of the year in which they were produced. However, if the transaction has been made through a broker, his commission or brokerage should be included because he has rendered productive service. Again services for self-consumption like those of housewives are not included as it is difficult to estimate their market value.
(ii) Sale of bonds by a company. This is merely a financial transaction which does not contribute directly to the flow of goods and services. Again services for self consumption like those of house wife are not included as it is difficult to estimate their market value.
(iii) Income of a smuggler. It is an illegal activity and all illegal activities (like smuggling, gambling, black marketing, etc.) are excluded from national income.
Let us briefly recall here concepts of Value Added.
(i) Value of output = Sales + Change in stock (It is always at MP)(i.e. gross output).
(ii) Value added = Value of output - Value of intermediate goods = Gross product = Gross Value Added at MP.
(iii) NVA at MP = GVA at MP - Depreciation.
(iv) NVA at FC = NVA at MP - Net indirect taxes = Sum of factor incomes.
(र in lakhs) |
||
(i) |
Purchase of material |
30 |
(ii) |
Depreciation |
12 |
(iii) |
Sales |
200 |
(iv) |
Excise tax |
20 |
(v) |
Opening stock |
15 |
(vi) |
Intermediate consumption |
48 |
(vii) |
Closing stock |
|
(र in thousands) |
||
(i) |
Sales |
500 |
(ii) |
Opening Stock |
30 |
(iii) |
Closing stock |
20 |
(iv) |
Purchase of intermediate products |
300 |
(v) |
Purchase of machinery |
150 |
(vi) |
Subsidy |
40 |
Gross value added = (i) + (iii - ii) - (iv)
= 500 + (20 - 30) - 300 = 190
Gross value added at FC = 190 + 40 subsidy = 230 thousands.