question_answer

Calculate Gross National Product at Factor Cost by (i) Income method and (ii) Expenditure method from the following data.

S.No.	Items	(Rs.) in crores
(i)	Net Domestic Capital Formation	500
(ii)	Compensation of Employees	1,850
(iii)	Consumption of Fixed Capital	100
(iv)	Government Final Consumption Expenditure	1,100
(v)	Private Final Consumption Expenditure	2,600
(vi)	Rent	400
(vii)	Dividend	200
(viii)	Interest	500
(ix)	Net Exports	\[(-)\]100
(x)	Profits	1,100
(xi)	Net Factor Income from Abroad	\[(-)\]50
(xii)	Net Indirect Taxes	250

Identify the economic value involved in the estimation of national income.

Answer:

(i) By Income Method Gross National Product at Factor Cost = Compensation of Employees + Rent + Interest + Profits + Net Factor Income from Abroad + Consumption of Fixed Capital \[=1,850+400+500+1,100+(-50)+\text{ }100\]=3,950-50=Rs. 3,900 crore       (ii) By Expenditure Method Gross National Product at Factor Cost = Private Final Consumption Expenditure + Government Final Consumption Expenditure + Net Domestic Capital Formation + Consumption of Fixed Capital + Net Exports + Net Factor Income from Abroad - Net Indirect Taxes \[=1,850+400+500+1,100(-100)+(-50)+\text{ }100\]= 4,300 - 400 = Rs.3,900 crore   The economic value involved in estimation of national income is to assess the level of economic development in the country.