Question

Find out from the following data :
(a) Net National Product at Factor Cost
(b) Gross Domestic Product at Market Price (\(GDP_{MP}\))
\begin{center} \begin{tabular}{|l|c|} \hline Items & Rs. (in Crores)
\hline (1) Rent & 100
\hline (2) Profit & 150
\hline (3) Interest & 75
\hline (4) Wages & 400
\hline (5) Employer's contribution to social security & 70
\hline (6) Net Factor Income from Abroad (NFIA) & 200
\hline (7) Net Indirect Taxes (NIT) & 90
\hline (8) Depreciation & 105
\hline \end{tabular} \end{center}

Hint:

Remember the identity: \(NNP_{FC}\) is the same as National Income.
To convert 'Net' to 'Gross', add Depreciation.
To convert 'Factor Cost' to 'Market Price', add Net Indirect Taxes (NIT).
To convert 'Domestic' to 'National', add NFIA.

Answer 1

Step 1: Understanding the Concept:
The Income Method is used to calculate National Income by summing up all factor incomes (Rent, Interest, Profit, and Compensation of Employees) generated within the domestic territory of a country.
Net National Product at Factor Cost (\(NNP_{FC}\)) is the official measure of National Income.
Gross Domestic Product at Market Price (\(GDP_{MP}\)) is the market value of all final goods and services produced within the domestic territory during a year, inclusive of depreciation and net indirect taxes.
Step 2: Key Formula or Approach:
1. \(NDP_{FC} = \text{Compensation of Employees (Wages + Employer's Social Security Contribution)} + \text{Operating Surplus (Rent + Interest + Profit)}\)
2. \(NNP_{FC} (\text{National Income}) = NDP_{FC} + \text{NFIA}\)
3. \(GDP_{MP} = NDP_{FC} + \text{Depreciation} + \text{NIT}\)
Step 2: Detailed Explanation:
Part (a): Calculation of Net National Product at Factor Cost (\(NNP_{FC}\))
First, we calculate \(NDP_{FC}\) (Domestic Income):
\[ NDP_{FC} = (\text{Wages} + \text{Employer's contribution}) + (\text{Rent} + \text{Profit} + \text{Interest}) \]
\[ NDP_{FC} = (400 + 70) + (100 + 150 + 75) \]
\[ NDP_{FC} = 470 + 325 = 795 \text{ Crores} \]
Now, calculate \(NNP_{FC}\):
\[ NNP_{FC} = NDP_{FC} + \text{NFIA} \]
\[ NNP_{FC} = 795 + 200 = 995 \text{ Crores} \]
Part (b): Calculation of Gross Domestic Product at Market Price (\(GDP_{MP}\))
We can derive \(GDP_{MP}\) from the previously calculated \(NDP_{FC}\):
\[ GDP_{MP} = NDP_{FC} + \text{Depreciation} + \text{Net Indirect Taxes (NIT)} \]
\[ GDP_{MP} = 795 + 105 + 90 \]
\[ GDP_{MP} = 900 + 90 = 990 \text{ Crores} \]
Step 3: Final Answer:
The calculated values are:
(a) Net National Product at Factor Cost (\(NNP_{FC}\)) = Rs. 995 Crores.
(b) Gross Domestic Product at Market Price (\(GDP_{MP}\)) = Rs. 990 Crores.