Methods for National Income Estimation

1. Income Method

2. Value Added Method

Value of Output = Sales + Change in Stock

GVA at MP = Value of Output-Intermediate Consumption
National Income (NNPatFC) = GVA at MP – consumption of fixed
capital - Net indirect tax + NFIA
Sales = Domestic Sales + Exports
Intermediate Consumption = domestic intermediate consumption + Imports = single
use producer goods = raw materials purchased
Sales = Sales to households + Sales to other firms + Exports
Sales = Sales to households + Production for self-consumption + Sales to other firms
+ Exports
 3. Expenditure Method
Components of Final Expenditure
(GDP at MP)

Investment
Private final government final net exports
expenditure/gross
consumption consumtion
domestic capital (X-M)
expenditure expenditure
formation

gross fixed capital inventory investment

formation (closing stock-opening stock)

business fixed public fixed

investment investment

fixed investment by
households

Private Income = Income from domestic product accruing to private sector + Net
factor income from abroad + All types of transfer incomes

Private income = National Income – Income from domestic product accruing to

Government Sector + Transfer incomes

Private income = Private sector income + NFIA + All transfer incomes

Personal income = Private income - corporate tax - Undistributed profit

Personal income = National income – Income of govt. (public) sector –

Corporate tax – Undistributed profit + All types of transfer incomes

Personal income = Domestic income – Income from domestic product accruing

to govt. sector – Corporate tax – Undistributed profit + NFIA + All types of
transfer incomes

Three main forms of transfer income used in numerical are:

(i) Interest on national debt

(ii) current transfers from government administrative departments and
(iii) net current transfers from rest of the world.
Numerical Questions : Income Method
1. Calculate a)Operating Surplus, and b)Domestic Income;

Items ₹ in Crore

i) Compensation of Employees 2,000

ii) Rent and interest 800

iii) Indirect Taxes 120

iv) Corporation tax 460

v) Consumption of fixed capital 100

vi) Subsidies 20

vii) Dividend 940

viii) Undistributed Profits 300

ix) Net Factor Income to abraod 150

x) Mixed Income 200

2. Calculate National Income

Items (₹ in crore)

i) Compensation of employees 2,000

ii) Profit 800

iii) Rent 300

iv) Interest 250

v) Mixed income of self employed 7000

vi) Net current transfers to abroad 200

vii) Net Exports – 100

viii) Net indirect taxes 1,500

ix) Net Factor income to abroad 60

x) Consumption of fixed capital 120

3. Calculate NNP at MP

Items (₹ in thousand crore)

1. Compensation of Employees 250

2. Mixed income of self employed 600

3. Profit 80

4. Rent 30

5. Interest 40

6. Net factor income to abroad – 10

7. Net exports 15

8. Consumption of fixed Capital 20

9. Net indirect taxes 10

10. Net current transfers to abroad 8

4. Calculate NNP at FC

Items (₹ in crore)

1. Profit 1,000

2. Mixed Income of self employed 15,000

3. Dividends 200

4. Interest 400

5. Compensation of employees 7,000

6. Net factor income to abroad 100

7. consumption of fixed capital 400

8. Net exports – 200

9. Net Indirect taxes 800

10. Net Current transfers to rest of the

40
world

11. Rent 500

 5. Find Net Domestic Product at Factor Cost

Items (₹ in crore)

1. Rent 200

2. Net Current transfers to abroad 10

3. National debt interest 60

4. Corporate tax 100

5. Compensation of employees 900

6. Current transfers to government 150

7. Interest 400

8. Undistributed Profits 50

9. Dividend 250

10. Net Factor income to abroad – 10

11. Income accruing to government 120

6. Calculate NNP at MP

Items (₹ in crore)

1. Net Factor Income to abroad – 10

2. Net current transfers to abroad 5

3. Consumption of fixed capital 40

4. Compensation of employees 700

5. Corporate tax 30

6. Undistributed Profits 10

7. Interest 90

8. Rent 100

9. Dividends 20

10. Net Indirect tax 110

11. Social security contributions by employees 11

 7. Find NNP at FC

(₹ in
Items
crore)

1. National debt interest 60

2. Wages and salaries 600

3. Net current transfers to abroad 20

4. Rent 200

5. Transfer payments by government 70

6. Interest 300

7. Net domestic product at factor cost accruing to

400
government

8. Social security contributions by employers 100

9. Net factor income paid to abroad 50

10. Profits 300

8. Calculate OS

Items (₹ in crore)

1. Compensation of employees 300

2. Indirect taxes 200

3. Consumption of fixed Capital 100

4. Subsidies 50

5. Gross Domestic Product at market price 600

 9. Calculate the following
a. Net Domestic Income
b. Gross Domestic Income
c. National Income
d. NNP at MP

Items (₹ in crore)

1. Indirect taxes 9000

2. Subsidies 1800

3. Depreciation 1700

4. Mixed Income of self employed 28000

5. Operating surplus 10000

6. Net factor income from abroad – 300

7. Compensation of employees 24000

10. Calculate national income

(₹ in
Items
crore)

1. Mixed income of self employed 200

2. Old age pension 20

3. Dividends 100

4. Operating surplus 900

5. Wages and Salaries 500

6. Profits 400

7. Employer’s contribution to social security

50
schemes

8. Net factor income from abroad – 10

9. Consumption of fixed capital 50

10. Net indirect tax 50

Numerical Questions: Value Added Method
1. Calculate:
a. GVA at MP
b. National Income

Items ₹ in lakh

(i) Value of Output:

800
a) Primary Sector
200
b) Secondary Sector
300
c) Tertiary Sector

(ii) Value of Intermediate inputs purchased by:

400
d) Primary Sector
100
e) Secondary Sector
50
f) Tertiary Sector

(iii) Indirect taxes paid by all sectors 50

(iv) Consumption of fixed capital of all sectors 80

(v) Factor income received by the residents from

10
rest of the world

(vi) Factor income paid to non-residents 20

(vii) Subsidies received by all sectors 20

2. Find NVA at FC

Items (₹ in lakh)

i) Durable use producer goods with a life span of 10 years 10

ii) Single use producer goods 5

iii) Sales 20

iv) Unsold output produced during the year 2

v) Taxes on production 1
 3. Calculate the Net Value Added at Factor Cost:

S.N Items (₹ in lakh)

i) Goods and Service tax 25

ii) Consumption of fixed Capital 5

iii) Closing Stock 10

iv) Corporate tax 15

v) Opening stock 20

vi) Sales 540

vii) Purchase of raw materials 140

4. Calculate the Gross Value Added at Market Price

S.N Items (₹ in lakh)

i) Goods and service tax 40

ii) Consumption of fixed capital 15

iii) Closing stock 20

iv) Sales 700

v) Subsidy 5

vi) Intermediate consumption 400

vii) Opening Stock 10

5. Calculate gross value added at market price.

S.N Items (₹ lakh)

i) Goods and service tax 30

ii) Sales 800

iii) Depreciation 50
iv) Net Change in stocks – 40

v) Purchase of raw materials 360

vi) Corporate tax 10

6. From the following data, calculate value added by firm X and by firm Y:

S.N Items (₹ lakh)

i) Closing stock of firm X 20

ii) Closing stock of firm Y 15

iii) Opening stock of firm Y 10

iv) Opening stock of firm X 5

v) Sales by firm X 300

vi) Purchases by firm X from firm Y 100

vii) Purchases by firm Y from firm X 80

viii) Sales by firm Y 250

ix) Import of raw material by firm X 50

x) Exports by firm Y 30

7. Calculate Value Added by Firms A and B from the following data:

S.N Items (₹ lakh)

i) Purchases by Firm B from Firm A 40

ii) Sales by Firm B 80

iii) Imports by Firm B 10

iv) Rent paid by Firm B 5

v) Opening stock of Firm B 15

vi) Closing Stock of Firm B 20

vii) Purchases by Firm A from Firm B 20

viii) Closing Stock of Firm A 20

ix) Opening Stock of Firm A 10

8. Find GDP at MP

S.N Items ₹ crore

Intermediate consumption of:

a) Primary sector 500
i)
b) Secondary Sector 400
c) Tertiary Sector 300

Value of Output
a) Primary Sector 1000
ii)
b) Secondary Sector 900
c) Tertiary Sector 700

ii) Rent 10

ix) Emoluments of Employees 400

v) Mixed Income 650

vi) Operating Surplus 300

vii) Net Factor Income from abroad – 20

viii) Interest 5

ix) Consumption of fixed capital 40

x) Net Indirect tax 10

9. Calculate Gross Domestic Product at market price

S.N Items (₹ lakh)

Net Value added at market price by:

a) Primary Sector 700
i)
b) Secondary Sector 1000
c) Tertiary Sector 1000

ii) Net Exports – 10

iii) Net Indirect tax 100

 Value of Intermediate consumption in:
a) Primary Sector 200
iv)
b) Secondary Sector 300
c) Tertiary Sector 300

Consumption of fixed capital in:

a) Primary Sector 20
v)
b) Secondary Sector 50
c) Tertiary Sector 30

10. Find NVA at FC

Items (₹ in crore)

1. Sales 800

2. Taxes on production 50

3. Depreciation 70

4. Opening Stock 100

5. Closing Stock 80

6. Intermediate cost 200

Numerical Questions: Expenditure Method
1. Find NNP at MP

Items (₹ in crore)

1. Gross domestic fixed capital formation 400

2. Private final consumption expenditure 8000

3. Government final consumption

3000
expenditure

4. Change in Stock 50

5. consumption of fixed capital 40

6. Net indirect taxes 100

7. Net exports – 60

8. Net factor income to abroad – 80

9. Net current transfers from abroad 100

10. Dividend 100

2. Calculate national income

Items (₹ in crore)

1. Net factor income to abroad – 50

2. Net indirect taxes 800

3. Net current transfers from rest of the world 100

4. Net imports 200

5. Private final consumption expenditure 5000

6. Government final consumption expenditure 3000

7. Gross domestic capital formation 1000

8. consumption of fixed capital 150

9. change in stock – 50

10. Mixed income 4000

 11. Scholarship to students 80

3. Calculate NDP at FC

Items (₹ in crore)

1. Private final consumption expenditure 8000

2. Government final consumption expenditure 1000

3. Exports 70

4. Imports 120

5. Consumption of fixed capital 60

6. Gross domestic fixed capital formation 500

7. Change in stock 100

8. Factor income to abroad 40

9. Factor income from abroad 90

10. Indirect taxes 700

11. Subsidies 50

12. Net Current transfers to abraod (-) 30

4. Calculate National Income

Items (₹ in crore)

1. Corporation tax 100

2. Private final consumption expenditure 900

3. Personal income tax 120

4. Government final consumption expenditure 200

5. Undistributed profits 50

6. Change in stocks – 20

7. Net Domestic fixed capital formation 120

8. Net Imports 10

9. Net Indirect tax 150

10. Net factor income from abroad – 10

11. Private Income 1000

5. Calculate Net National Product at Market Price:

Items (₹ in crore)

1. Net Current transfers to abroad 10

2. Private final consumption expenditure 500

3. Current transfers from government 30

4. Net factor income to abroad 20

5. Net exports – 20

6. Net indirect tax 120

7. National debt interest 70

8. Net Domestic Capital formation 80

9. Income accruing to government 60

10. Government final consumption expenditure 100

6. Find Gross National Product at Market Price:

Items (₹ in crore)

1. Private final consumption expenditure 800

2. Net Current transfers to abroad 20

3. Net factor income to abroad – 10

4. Government final consumption expenditure 300

5. Net Indirect tax 150

6. Net Domestic Capital Formation 200

7. Current transfers from government 40

8. Depreciation 100

9. Net Imports 30

10. Income accruing to government 90

11. National debt interest 50

7. Calculate National Income

Items (₹ in crore)

1. Net imports 5

2. Net domestic capital formation 15

3. Personal Income 90

4. National debt interest 10

5. Corporate tax 25

6. Government final consumption expenditure 20

7. Net factor income to abroad –5

8. Net indirect tax 10

9. Undistributed profits 0

10. Private final consumption expenditure 100

8. Calculate Net Domestic Product at Market Price.

Items (₹ in crore)

1. Private Final consumption expenditure 400

2. Opening stock 10

3. Consumption of fixed capital 25

4. Imports 15

5. Government final consumption expenditure 90

6. Net current transfers to rest of the world 5

7. Gross domestic fixed capital formation 80

8. Closing stock 20

9. Exports 10

10. Net factor income to abroad –5

9. Calculate Net National Product at Market Price

Items (₹ in crore)

1. Transfers Payments by government 7

2. Government final consumption expenditure 50

3. Net imports – 10

4. Net domestic fixed capital formation 60

5. Private final consumption expenditure 300

6. Private Income 280

7. Net factor income to abroad –5

8. Closing Stock 8

9. Opening stock 8

10. Depreciation 12

11. Corporate tax 60

12. Retained earnings of corporations 20

 10. Calculate National Income

Items (₹ in crore)

1. Personal tax 80

2. Private final consumption expenditure 600

3. Undistributed profits 30

4. Private Income 650

5. Government final consumption expenditure 100

6. Corporate tax 50

7. Net Domestic fixed capital formation 70

8. Net Indirect tax 60

9. Depreciation 14

10. Change in stocks – 10

11. Net imports 20

12. Net factor income to abroad 10

Numerical Questions: PI, PDI
1. Calculate Personal Income and PDI

Items Rs (Crores)
(a) Net Domestic Product at Factor 8000
Cost
(b) Net Factor Income from Abroad 200
(c) Undistributed Profit 1000
(d) Corporate Tax 500
(e) Interest Received by Households 1500
(f) Transfer Paid by Households 1200
(g) Transfer Income 300
(h) Personal Tax 500

2. calculate Personal Income and Personal Disposable Income.

Items Rs (crore)
Net Domestic Product at factor cost 8,000
Net Factor Income from abroad 200
Undisbursed Profit 1,000
Corporate Tax 500
Interest Received by Households 1,500
Interest Paid by Households 1,200
Transfer Income 300
Personal Tax 500

3. Calculate PDI

Items (Rs in Crores)

Net domestic product at factor cost 800
accruing to private sector
Current transfers from government 70
Savings of private corporate sector 200
Corporate tax 40
Direct taxes paid by households 30
Depreciation 60
NFIA 20
Net current transfers to rest of the world -10
 4. Find Gross National Product at Market Price and Private Income:

(Rs. in crores)
(i) Private final consumption expenditure 800
(ii) Net current transfers to abroad 20
(iii) Net factor income to abroad -10
(iv) Government final consumption 300
expenditure
(v) Net indirect tax 150
(vi) Net domestic capital formation 200
(vii) Current transfers from government 40
(viii) Depreciation 100
(ix) Net imports 30
(x) Income accruing to government 90
(xi) National debt interest 50
Income Method
1. OS=2500; DI=4700
2. NNP at FC=10290
3. NNP at MP= 1020
4. NNP at FC= 23800
5. NDP at FC= 1900
6. NNP at MP= 1070
7. NNP at FC= 1450
8. OS= 50
9. a=62000; b=63700; c=61700; d=68900
10. NNP at FC= 1640
Value Added Method
1. GVA at MP = ₹750 lakh
NNP at FC = ₹630 lakh
2. NVA at FC = ₹ 15 lakh
3. NVA at FC = ₹ 360 lakh
4. GVA at MP = ₹ 310 lakh
5. GVA at MP = ₹ 400 Lakh
6. Value added by Firm X = ₹ 165 lakh
Value added by Firm Y = ₹ 175 lakh
7. Value Added by Firm A = ₹ 30
Value Added by Firm B = ₹ 35 lakh
8. GDP at MP = 1400 cr
9. GDP at MP = 2800 lakh
10. NVA at FC= 460 lakh
Expenditure Method
1. NNP at MP = ₹11430
2. National Income = 8800 – 150 – 800 + 50 = ₹7900 crore
3. NDP at FC = 9550 – 60 – (700 – 50) = ₹8840 crore
4. National Income = 1190 – 0 + (- 10) – 150 = ₹1030 crore
5. NNP at MP = 660 – 0 – 20 = ₹ 640 crore
6. GNP at MP = ₹ 1380 crore
7. NNP at FC = ₹ 125 crore
8. NDP at MP = ₹ 550
9. NNP at MP = ₹ 425 crore
10. NNP at FC = 670 crore
PI and PDI
1. PI=8500; PDI=6800
2. PI=7300; PDI= 6800
3. PDI= 680
4. GNP at MP= 1380; Private Income=1110