From the following data calculate National Income by Income and Expenditure methods: (Rs crore) (i)
Government final consumption expenditure
(ii)
Subsidies
(iii)
Rent
200
(iv)
Wages and salaries
600
(v)
Indirect taxes
(vi)
Private final consumption expenditure
800
(vii)
Gross domestic capital formation
120
(viii)
Social security contributions by employers
(ix)
100 10
60
Royalty
55 25
(x)
Net factor income paid to abroad
30
(xi)
Interest
20
(xii)
Consumption of fixed capital
(xiii)
Profit
(xiv)
Net exports
70
(xv)
Change in stock
50
130
Sol : Income Method National Income = iv + viii + (iii + i ) + i + iii – = 600 + 55 + (200 +25) + 20 +130 -30 = Rs 1,000 crore
E penditure Method National Income = vi + i + vii + iv – v + ii – ii – = 800 + 100 + 120 + 70 – 60 + 10 – 10 – 30 = Rs 1,000 crore
10
Q. From the following data calculate (a) Gross Domestic Product at Market Price , and (b) Factor Income from Abroad: Items Rs in crore i) Gross national product at factor cost 6,150 ii) Net exports (-)50 iii) Compensation of employees 3,000 iv) Rent 800 v) Interest 900 vi) Profit 1,300 vii) Net indirect taxes 300 viii) Net domestic capital formation 800 ix) Gross fixed capital formation 850 x) Change in stock 50 xi) Dividend 300 xii) Factor income to abroad 80 Solution:
(a) Gross Domestic Product at Market Price = Compensation of employees+ Rent+ Interest+ Profit +Mixed income+ Net indirect taxes+ Consumption of fixed capital Note: Consumption of fi ed capital= Gross fi ed capital formation+ Change in stock- Net domestic capital formation =Rs 3,000crore+ Rs 800 crore+ Rs 900 crore+ Rs 1,300 crore+ Rs 0crore+ Rs 300 crore+ (Rs 850 crore+ Rs 50 crore- Rs 800 crore) = Rs 3,000crore+ Rs 800 crore+ Rs 900 crore+ Rs 1,300 crore+ Rs 0crore+ Rs 300 crore+ Rs 100 crore = Rs 6,400crore
(b) Factor Income from Abroad Gross national product at Market Price = Gross national product at factor cost+ Net indirect taxes = Rs 6,150crore+ Rs 300crore = Rs 6,450crore
Net Factor Income from Abroad = Gross national product at Market Price- Gross Domestic Product at Market Price = Rs 6,450crore- Rs 6,400crore = Rs 50crore Net Factor Income from Abroad = Factor Income from Abroad - Factor income to abroad Or Factor Income from Abroad = Net Factor Income from Abroad+ Factor income to abroad = Rs 50crore+ Rs 80crore = Rs 130crore
PRODUCT METHOD OR VALUE ADDED METHOD GDP
MP
= Value of Output – intermediate consumption
Sales * Value of Output Change in Stock (C.S- O.S)
CONVERSIONS ( + )DEPRECIATION
NET
> GROSS
( - ) DEPRECIATION
DOMESTIC
( + )NET FACTOR INCOME FROM ABROAD
> NATIONAL
( - )NET FACTOR INCOME FROM ABROAD
FACTOR COST
( + )NET INDIRECT TAXES ( - )NET INDIRECT TAXES
> MARKET PRICE
Q. Calculate Net Value added at factor cost from the following data : Sr. No. 1 2 3 4 5 6 7
Items Purchase of machinary Sales Intermediate Cost Indirect ta es Change in stock E cise Duty Stock of raw material
Rs. In Crore 100 200 90 12 10 6 5
Sol: NVAFC = Sales + Change in Stock – Intermediate Cost – Indirect Ta es = 200 + 10 – 90 – 12 = 108 Crore
Q. An Economy has two firms A & B on the basis of following information find out a) Value added by firm A & B b) GDP at Market Price
Sr. No.
Items
Rs. In Lakh
1
E ports by firm A
20
2
Imports by firm A
50
3
Sales to house holds by firm A
90
4
Sales to firm B by firm A
40
5
Sales to firm A by firm B
30
6
Sale to house hold by firm B
60
Sol: a) Value added by firm A = Sale to households +Sales to firm B + Exports – Imports – Purchase from firm B
= 90 +40+20-50-30 =
Value added by firm B
70 Lakh
= Sales to Firm A + Sales to households – purchase from firm A = 30+60-40 = 50 Lakh
b) GDP MP = Value added by firm A + value added by Firm B = 70+50 = 120 Lakh
FORMULAS RELATED TO PRIVATE, PERSONAL & PERSONAL DISPOSABLE INCOME 1. FACTOR INCOME FROM NET DOMESTIC PRODUCT OCCURING TO PRIVATE SECTOR = NDP
FC
– PROPERTY & ENTREPRENEURIAL INCOME OF THE
DEPARTMENTAL ENTERPRISES OF THE GOVT. – SAVING OF NONDEPARTMENTAL ENTERPRISES
2. PRIVATE INCOME = FACTOR INCOME FROM NET DOMESTIC PRODUCT OCCURING TO PRIVATE SECTOR + NET FACTOR INCOME FROM ABROAD + CURENT TRANSFERS FROM GOVT. + CURENT TRANSFER FROM REST OF THE WORLD + INTEREST ON NATIONAL DEBT 3. PERSONAL INCOME = PRIVATE INCOME – CORPORATE PROFIT TAX – UNDISTRIBUTED PROFITS
4. PERSONAL DISPOSABLE INCOME = PERSONAL INCOME – DIRECT PERSONAL TAX – MISC. FEES & FINE PAID BY THE HOUSEHOLDS
NOTE :
PRIVATE, PERSONAL & PERSOBAL DISPOSABLE INCOME ARE DEPENDANT UPON EACH OTHER
FROM THE FOLLOWING DATA ESTIMATE : a. PERSONAL INCOME b. PRIVATE INCOME c.
PERSONAL DISPOSABLE INCOME
Sr. No.
Items
Rs. in Crore
1
National Income
1300
2
Corporate Profit Ta
15
3
Direct Personal Ta
40
4
Saving of Private Corporate Sector
25
5
Income from Property & Entrepreneurship
35
occurring to Administrative Department 6
Current Transfers from Govt.
30
7
National Debt Interest
10
8
Saving of non-departmental public enterprises
5
9
Current transfers from rest of the world
15
Sol : a.
PERSONAL INCOME = National Income – Income from property and entrepreneurship accruing to Govt. administrative departments – Saving of non-departmental public enterprises + National debt interest + Current transfers from the govt. administrative departments + Current transfers from rest of the world – saving of private corporate sector – corporate profit ta
= 1300
– 35-5+10+30+15-25-15
= 1275 b)
PRIVATE INCOME = Personal Income + Corporate Profit ta + Saving of private corporate sector = 1275 + 15 + 25 = 1325 Crore
c) Personal Disposable Income = Personal Income – Direct Personal ta es = 1275 – 40 = 1235 Crores
Q. From the following data, calculate a) Private Income b) Personal Disposable Income
Sr. No. 1 2 3 4 5 6 7 8
Items Income from domestic product accruing to the private sector Saving of non-departmental public enterprises Current transfers from govt. administrative departments Savings of private corporate sector Current transfers from rest of the world Net factor income from abroad Corporation tax Direct personal taxes
Rs.in Crore) 4,000 200 150 400 50 (-40) 60 140
Sol: a) Private Income = Income from domestic product accruing to private sector + Current transfers from govt. administrative departments + Current transfers from rest of the world + Net factor income from abroad
= 4000+150+50+(-40) = 4160 Crore b)
Personal Disposable Income = Private income –Savings of private corporate Sector – corporation tax – Direct personal taxes. = 4160-400-60-140 = 4160-600 = 3560 Crores
Q. 24. Calculate ‘Private Income’ from the following data : Sr. No.
Items
Rs. In Crore
1 2
National debt interest Gross national product at market price Current transfers from govt. Net indirect ta es Net current transfers from the rest of the world Net domestic product at factor cost accruing to govt. Consumption of fi ed capital
30 400
3 4 5 6 7
20 40 (- ) 10 50 70
SOL : PRIVATE INCOME = Gross National product at market price – Net domestic product at factor cost accruing to govt. – net indirect ta es – Consumption of fi ed capital + National debt interest + Current transfers from govt. + Net current transfers from the rest of the world.
Net National Disposable Income = Net Domestic Income + Net Indirect Taxes + Net factor income from abroad + net current transfers from rest of the world.
Gross National Disposable Income = Net National Disposable Income + Current replacement cost (depreciation)
Q. Calculate Net National Product at factor cost and Gross National Disposable income from the following : Sr. No.
Item
Rs. In Crores
1 2 3 4 5 6 7 8 9 10 11
Profit Net Current transfer to Abroad Royalty Wages & Salaries Consumption of fixed capital National Debt interest Interest paid by Production Unit Social Security contribution by employers Net factor income paid to Abroad Rent Net indirect tax
200 (-) 10 10 600 60 80 120 100 (-) 20 50 70
Sol : NNPFC =
Wages & Salaries + Profit + Royalty + Rent + Interest Paid by Production Unit + Social security contribution paid by employers – Net factor income to abroad
= 600+200+10+50+120+100-(-20) = 1100 Crores
Gross National Disposable Income = NNPFC+ Consumption of fixed capital + Net indirect tax – Net current transfers to abroad =
1100 +60+70 –(-10)
= 1240 Crores Q. Find out (a) National Income , & (b) Net National Disposable Income : Sr. No. 1 2 3 4 5 6 7 8 9 10
Items Net domestic fixed capital formation Factor income from abroad Change in stock Net Indirect tax Net current transfer to abroad Private final consumption expenditure Consumption of fixed capital Govt. Final Consumption Expenditure Net factor income to abroad Net imports
