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If GDP at factor cost is ₹9,700 crore, indirect taxes are ₹850 crore and subsidies are ₹250 crore, what will be GDP at market price?

Answer and explanation

Correct answer: ₹10,300 crore

First calculate net indirect taxes: NIT = indirect taxes − subsidies = ₹850 − ₹250 = ₹600 crore. To convert GDP at factor cost into GDP at market price, add NIT: GDP at market price = ₹9,700 + ₹600 = ₹10,300 crore. Subsidies reduce the net tax burden, so adding the full tax without subtracting subsidies would overstate the answer.

Related tags

EconomicsGdpMarket PriceFactor CostNitSubsidiesNumericalGdp And Welfare

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