Question

Estimate compensation of employees from the following data:

	(₹ in crore)
(i) Value of output at market prices	570
(ii) Net indirect taxes	60
(iii) Interest	20
(iv) Rent	35
(v) Profit	25
(vi) Intermediate consumption	120
(vii) Consumption of fixed capital	50
(viii) Mixed income of self-employed	100

Answer 1

To estimate the compensation of employees, we apply the formula:

GDP at Factor Cost = Compensation of Employees + Operating Surplus + Mixed Income

∴ Operating surplus = Interest + Rent + Profit

Included (₹ in crore):

Value of output at market prices = ₹ 570

Intermediate consumption = ₹ 120

Net indirect taxes = ₹ 60

Interest = ₹ 20

Rent = ₹ 35

Profit = ₹ 25

Mixed income of self-employed = ₹ 100

Excluded item:

Consumption of fixed capital = ₹ 50

Step 1:

Gross Value Added at Market Prices (GDP_MP) = Value of output at market prices − Intermediate consumption

= 570 − 120 

= ₹ 450 crore

NDP at MP = GDP at MP − Depreciation

= 450 − 50 

= ₹ 400 crore

Step 2:

GDP_FC ​= GDP at MP − Net Indirect Taxes

= 400 − 60 

= ₹ 340 crore

Step 3:

Formula for compensation of employees:

Compensation of Employees = GDP at FC − Operating Surplus − Mixed Income

= 340 − (20 + 35 + 25) − 100

= 340 − 80 − 100

= 340 − 180

= ₹ 160 crore