Question

On the basis of the given data, estimate the value of Gross Domestic Product at Factor Cost (GDP_FC) :

S. No.	Items	Amount (in ₹ crore)
(i)	Private final consumption expenditure	800
(ii)	Government final consumption expenditure	700
(iii)	Net imports	200
(iv)	Gross public investment	100
(v)	Inventory investment	50
(vi)	Gross residential construction investment	300
(vii)	Net indirect taxes	70
(viii)	Gross business fixed investment	130
(ix)	Consumption of fixed capital	20
(x)	Interest	150
(xi)	Net factor income paid to abroad	100

Hint:

Use the expenditure method: GDP at market price = 800 + 700 + (100 + 50 + 300 + 130) - 200 = 1880. Then subtract net indirect taxes of 70 to get GDP at factor cost = Rs. 1,810 crore.

Answer 1

Step 1: Pick the right method:
The data has consumption, investment and imports. So this is the expenditure method.
Under this method, \( GDP_{MP} = C + G + I - (X - M) \), where C is private final consumption, G is government final consumption, I is gross domestic capital formation and (X - M) is net exports. Here net imports are given, so we subtract them directly.
Then \( GDP_{FC} = GDP_{MP} - \text{Net indirect taxes} \).

Step 2: Find gross domestic capital formation:
Gross domestic investment is the sum of gross public investment, inventory investment, gross residential construction investment and gross business fixed investment.
\[ I = 100 + 50 + 300 + 130 = 580 \]
So gross investment is Rs. 580 crore.

Step 3: Find GDP at market price:
\[ GDP_{MP} = 800 + 700 + 580 - 200 \]
\[ GDP_{MP} = 2080 - 200 = 1880 \]
So GDP at market price is Rs. 1,880 crore.

Step 4: Find GDP at factor cost:
Net indirect taxes (indirect taxes minus subsidies) are included in market price but are not earned by factors of production. So we deduct them.
\[ GDP_{FC} = 1880 - 70 = 1810 \]

Item	Amount (Rs. crore)
Private final consumption expenditure	800
Government final consumption expenditure	700
Gross public investment	100
Inventory investment	50
Gross residential construction investment	300
Gross business fixed investment	130
Less: Net imports	(-) 200
GDP at market price	1,880
Less: Net indirect taxes	(-) 70
GDP at factor cost	1,810

Step 5: Check the items that were not used:
Interest (Rs. 150 crore) is a factor income. It is used in the income method, not in the expenditure method, so it is left out here.
Consumption of fixed capital (Rs. 20 crore) is needed only to move from gross to net. We want a gross figure, so we do not deduct it.
Net factor income paid to abroad (Rs. 100 crore) is needed only to move from domestic to national product. We want a domestic figure, so it is not used.

Final Answer:
GDP at factor cost is Rs. 1,810 crore. \[ \boxed{GDP_{FC} = \text{Rs. } 1{,}810 \text{ crore}} \]