Methods of calculating national income - Value Added/Product Method

The production or value-added method obtains NDP by adding the net value added generated by all producing units, assuming the figures are already measured on the required basis. The calculation is 220 + 310 + 270 + 200 = 1000 crore rupees. Hence option C is correct. The other options result from incomplete addition or arithmetic errors and do not equal the combined contribution of all four units.

The value of output includes both sales and the change in inventories because goods produced but not sold are added to stock. Thus, value of output = sales + change in stock = 860 + 40 = 900 lakh rupees. Option C is correct. Option B ignores unsold production, option A subtracts an increase incorrectly, and option D adds an extra 40 beyond the actual inventory adjustment.

Value of output = sales + change in stock, where change in stock = closing stock − opening stock. Here the change is 170 − 210 = −40 lakh rupees, indicating that inventories fell. Therefore value of output = 1500 + (−40) = 1460 lakh rupees, so option A is correct. B treats the decline as an increase, C ignores stock change, and D subtracts the opening stock without adding closing stock.

The old machine is a second-hand asset, so its sale value of ₹12 lakh is not counted again as current production; it was recorded when the machine was originally produced. However, the sales agent supplies a current brokerage service valued at ₹30,000. Thus only the commission enters current production, making option C correct, not the machine’s resale price or their sum.

Under the value-added method, gross value added equals value of output minus intermediate consumption: 1450 − 520 = 930 crore rupees. Net value added is obtained by further deducting depreciation: 930 − 110 = 820 crore rupees. Therefore, option A is correct. Option B is only gross value added, while C and D use incorrect deductions.

The change in inventories is closing stock minus opening stock: 215 − 260 = −45 lakh rupees. A fall in stock reduces the value of current output, so value of output = sales + change in stock = 1800 + (−45) = 1755 lakh rupees. Thus, option A is correct. Option B reverses the inventory change, and C ignores it.

Under the value-added or production method, gross value added measures the new value created by a firm during production. It is calculated as Gross Value of Output minus Intermediate Consumption. Therefore, option B is correct. Wages are only one component of value added, while depreciation is deducted from gross value added to obtain net value added; adding intermediate consumption would double count inputs.

The conversion formula is NDP at factor cost = NDP at market price − net indirect taxes. Since net indirect taxes are −170 crore rupees, the calculation becomes 6,380 − (−170) = 6,380 + 170 = 6,550 crore rupees. A negative tax figure represents that subsidies exceed indirect taxes, so factor-cost value is higher. Therefore, option C is correct.

Under the value-added or production method, net value added at market price is calculated as output value minus intermediate consumption minus depreciation. Intermediate consumption represents goods and services used up during production, while depreciation represents the loss of value of fixed assets. Therefore, option A gives the correct formula; adding these items would overstate current production.