Question

Calculate NDP_FC and NNP_FC on the basis of the following information.

S. No.	Items	₹ (in crores)
(a)	Value of output of primary sector	1300
(b)	Value of output of other sectors	700
(c)	Raw materials purchased by primary sector	800
(d)	Raw materials purchased by the other sectors	600
(e)	Consumption of fixed capital	85
(f)	Subsidies	40
(g)	Indirect taxes	120
(h)	Factor income paid to the rest of the world	30
(i)	Factor income received from rest of the world	15

Answer 1

Calculation of NDP at Factor Cost (NDP_FC) and NNP at Factor Cost (NNP_FC)

Step 1: Calculate Net Domestic Product at Factor Cost (NDP_FC)

NDP at Factor Cost is calculated using the formula:

NDP_FC = GDPMP − Depreciation – Indirect Taxes + Subsidies

Step 2: Calculate Gross Domestic Product at Market Price (GDP_MP)

GDP_MP = Value of Output of Primary Sector + Value of Output of Other Sectors − Raw Materials Purchased GDP_MP

= (1300 + 700) − (800 + 600)

= 600

Step 3: Apply the Formula for NDP_FC

NDP_FC = 600 – 85 – 120 + 40

= 435

Step 4: Calculate Net National Product at Factor Cost (NNP_FC)

NNP at Factor Cost is calculated as:

NNP_FC = NDP_FC + Factor Income Received from Rest of the World − Factor Income Paid to Rest of the World

NNP_FC = 435 + 15 − 30

NNP_FC = 420

NDP_FC = ₹ 435 crores

NNP_FC = ₹ 420 crores