Question

On the basis of the data given below for an imaginary economy, estimate the value of Net Domestic Product at Factor Cost (\(NDP_{FC}\)): \[ \begin{array}{|l|l|l|} \hline \textbf{S. No.} & \textbf{Items} & \textbf{Amount (in ₹ crore)} \\ \hline (i) & \text{Gross Domestic Fixed Capital Formation} & 300 \\ (ii) & \text{Exports} & 70 \\ (iii) & \text{Government Final Consumption Expenditure} & 400 \\ (iv) & \text{Consumption of Fixed Capital} & 50 \\ (v) & \text{Household Final Consumption Expenditure} & 590 \\ (vi) & \text{Inventory Investment (Net)} & -60 \\ (vii) & \text{Imports} & 80 \\ (viii) & \text{Net Indirect Taxes} & 50 \\ (ix) & \text{Net Factor Income from Abroad} & 40 \\ \hline \end{array} \]

Hint:

Always calculate \(GDP_{MP}\) first and adjust for depreciation and net indirect taxes to find \(NDP_{FC}\).

Answer 1

The formula to calculate \(NDP_{FC}\) is: \[ NDP_{FC} = \text{GDP}_{MP} - \text{Depreciation} - \text{Net Indirect Taxes} \] Where: \[ \text{GDP}_{MP} = \text{Consumption Expenditure (Household + Government)} + \text{Gross Investment (Fixed + Inventory)} + \text{Net Exports (Exports - Imports)} \] Step 1: Calculate \(\text{GDP}_{MP}\): \[ GDP_{MP} = (590 + 400) + (300 - 60) + (70 - 80) = 1220 \] Step 2: Subtract Depreciation and Net Indirect Taxes: \[ NDP_{FC} = GDP_{MP} - \text{Depreciation} - \text{Net Indirect Taxes} \] \[ NDP_{FC} = 1220 - 50 - 50 = 1130 \, \text{crore} \]