Aggregates related to national income - NDP

Use the expenditure identity NDP at market price = PFCE + GFCE + NDCF + net exports. Substitution gives ₹6,200 + ₹1,800 + ₹1,100 + (−₹300) = ₹8,800 crore. Therefore, option C is correct. The negative net-export figure must be subtracted because imports exceed exports; adding ₹300 crore would incorrectly produce ₹9,400 crore.

The governing calculation is NVA at market price = output value − intermediate consumption − depreciation. First, gross value added is ₹1,200 − ₹700 = ₹500 lakh. After deducting depreciation of ₹80 lakh, NVA becomes ₹500 − ₹80 = ₹420 lakh. Thus, option B is correct. ₹500 lakh is only GVA, while the other figures result from incorrect deductions.

NDP measures the value of net production generated during the current period. A used motorcycle was produced and counted when it was originally manufactured, so its resale is only a transfer of ownership and does not represent new current production. Including its full resale value again would cause double counting. Therefore, option A is correct; the reason is not its type, tax treatment, or price.

The governing principle is that NDP includes current production and current productive services, but excludes the resale value of an already produced used asset. The dealer’s ₹8,000 commission is payment for a brokerage service provided in the current period, so it is included. The motorcycle’s full resale value is excluded because it was counted when first produced. Hence, option B is correct.

A scholarship is generally treated as a transfer payment because the recipient does not provide a current productive service directly in exchange for it. NDP measures current production, so a transfer is not counted as factor income or output. The scholarship may finance education, but that does not change its immediate classification. Therefore, option A is correct; it is neither necessarily foreign income, capital formation, nor an indirect tax.

Owner-occupied housing provides a real housing service even though no rent is paid in cash. National-income accounting therefore imputes the rent that a comparable house could have earned in the market. This estimated rent represents the current service consumed by the family and is included in domestic product. The house’s full purchase price, property tax, and construction year do not measure the period’s housing service. Option A is correct.

NDP records current production even when the output is not sold for cash in a market. Milk produced during the current period for the producer’s own household is a current good and can be valued at its imputed or comparable market price. It is not a capital good or transfer income, and market sale is not essential for recognizing the output. Thus, option A correctly states the governing principle.

Under the expenditure method, spending on a new factory building is recorded as gross fixed capital formation because the building is a durable asset used repeatedly in production over several years. It is not household consumption, a transfer payment, or an input used up immediately in one production cycle. For obtaining net investment or NDP-related measures, depreciation of the building is later deducted from gross capital formation. Option B is correct.

The governing relation is NDCF = GDCF − depreciation, because net capital formation measures the addition to the capital stock after allowing for worn-out capital. Thus, NDCF = ₹2,300 crore − ₹850 crore = ₹1,450 crore. Therefore, option B is correct. Option A uses an incorrect subtraction, while C reports gross formation without adjustment and D incorrectly adds depreciation.

Net domestic capital formation is calculated as gross investment minus depreciation. If it equals zero, then gross investment − depreciation = 0, so gross investment must equal depreciation. This means new investment only replaces the capital consumed through wear and tear. Option A is therefore correct; zero net formation does not imply zero investment, zero depreciation, or zero NDP.

The governing formula is net investment = gross investment − depreciation. Substitution gives ₹1,100 crore − ₹1,350 crore = −₹250 crore. Hence option B is correct. The negative result means depreciation exceeds new investment, so the economy experiences a reduction in its capital stock. Option A gives only the magnitude and misses the negative sign; C ignores depreciation and D adds the two figures.

Real NDP removes the effect of price changes from nominal NDP. Using the standard formula, real NDP = (nominal NDP ÷ price index) × 100. Therefore, (₹9,450 ÷ 135) × 100 = ₹7,000 crore. Option B is correct. The other options result from incorrect division, multiplication, or an inaccurate adjustment for the index.

The relevant identity is National Income = NDP at factor cost + NFIA. Rearranging gives NDP at factor cost = National Income − NFIA. Hence, ₹14,200 crore − ₹700 crore = ₹13,500 crore, so option B is correct. Adding NFIA would incorrectly move from domestic to national income, while option C ignores NFIA and the other figures use wrong arithmetic.

The governing principle is domestic territory: domestic product includes production occurring within a country's economic territory, regardless of the nationality of the owners. Therefore, the Indian unit's output is included in India's domestic product and, after deducting depreciation, in NDP. Option A is correct. Ownership nationality affects national aggregates through factor-income flows, not the location-based domestic measure.

NDP is based on production within a country’s domestic territory, not simply on the nationality of the enterprise owner. The Dubai branch operates outside India’s economic territory, so its output is excluded from India’s NDP. Its production may enter Dubai’s domestic product and can be relevant to India’s national income through factor-income rules. Profit, imports, or foreign employees do not determine domestic territory.

In national accounting, domestic territory is an economic concept and includes certain premises under the control of foreign governments, such as embassies. Therefore, a foreign embassy in India is treated as part of the sending country’s economic territory rather than India’s domestic territory. It may provide services, and depreciation or private ownership is not the deciding principle.

National accounting treats aircraft operated by a resident airline as part of that airline’s domestic territory, even when the aircraft is flying internationally. Thus, the transport services produced by an Indian resident airline are included in India’s domestic product. The destination country, passengers’ nationalities, and flight route alone do not determine the treatment.

Normal depreciation measures the expected and gradual wearing out of fixed capital through regular production use, age, or obsolescence. A machine destroyed suddenly by a flood suffers an exceptional accidental capital loss, which is recorded separately rather than treated as ordinary consumption of fixed capital. It is not an intermediate good, government expenditure, or net export.

Green NDP extends the conventional NDP framework by accounting for environmental damage and the depletion of natural resources. In principle, the value of produced-capital depreciation, pollution damage, and resource depletion is considered when estimating sustainable net output. It does not aim merely to increase exports, eliminate depreciation, or add transfer payments, because those are unrelated to its environmental objective.

Use both required adjustments: first convert GDP to NDP by subtracting depreciation, then convert market price to factor cost by subtracting net indirect taxes. Thus, NDP at factor cost = GDP at market price − depreciation − net indirect taxes = 19,500 − 1,600 − 1,100 = ₹16,800 crore. Therefore option B is correct; the other values omit or mishandle one adjustment.

The relevant principle is NDP at factor cost = NDP at market price − net indirect taxes. Net indirect taxes equal ₹50 crore − ₹10 crore = ₹40 crore. Hence NDP at factor cost = ₹600 crore − ₹40 crore = ₹560 crore, so option B is correct. The depreciation distinction is already reflected in NDP and does not enter this conversion.

To move from factor cost to market price, add net indirect taxes: NDP at Market Price = NDP at Factor Cost + Net Indirect Taxes. Therefore, ₹760 crore + ₹55 crore = ₹815 crore, so option C is correct. Option A subtracts taxes in the reverse direction, option B ignores the tax adjustment, and option D adds an incorrect amount of ₹110 crore.

The relevant concept is the conversion of an aggregate from market price to factor cost. Net indirect taxes = Indirect Taxes − Subsidies = ₹175 − ₹65 = ₹110 crore. Therefore, NDP at factor cost = NDP at market price − NIT = ₹1,460 − ₹110 = ₹1,350 crore. Hence, option B is correct; the other values result from ignoring or reversing the tax adjustment.

Two adjustments are required. First, subtract depreciation to convert gross domestic product into net domestic product. Second, subtract net indirect taxes to move from market price to factor cost. Therefore, NDP at factor cost = ₹25,000 − ₹2,000 − ₹1,500 = ₹21,500 crore. Option B is correct. Option C makes only the depreciation adjustment, while D and A do not apply both adjustments correctly.

To move from NDP at factor cost to GDP at market price, add depreciation to change net into gross and add net indirect taxes to change factor cost into market price. Thus GDP at market price = ₹17,200 + ₹1,300 + ₹800 = ₹19,300 crore. Option C is correct. The lower alternatives omit one adjustment or use an incorrect total.