Question

On the basis of the given data, estimate the value of Net Domestic Product at Factor Cost (NDP_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:

Find GDP at market price as C + G + gross investment - net imports, which gives Rs. 1,880 crore. Then subtract net indirect taxes (70) and consumption of fixed capital (20).

Answer 1

Step 1: Choose the method:
We are given expenditure items, so we use the expenditure method. It adds up all the spending on final goods and services made inside the domestic territory.
\( GDP_{MP} = C + G + I + (X - M) \), where C is private consumption, G is government consumption, I is gross investment and (X - M) is net exports.
Then \( NDP_{FC} = GDP_{MP} - \text{Consumption of fixed capital} - \text{Net indirect taxes} \).

Step 2: Pick the right items from the table:
Private final consumption expenditure (i) = 800 and government final consumption expenditure (ii) = 700.
Gross investment has four parts: gross public investment (iv) = 100, inventory investment (v) = 50, gross residential construction investment (vi) = 300 and gross business fixed investment (viii) = 130.
Net imports (iii) = 200. Net exports are negative, so we subtract 200.
Interest (x) and net factor income paid to abroad (xi) are not needed. They are income items, and NFIA is used only for national income, not domestic product.

Step 3: Find GDP at market price:
Gross investment = 100 + 50 + 300 + 130 = 580.
\[ GDP_{MP} = 800 + 700 + 580 - 200 \]
\[ GDP_{MP} = \text{Rs. } 1,880 \text{ crore} \]

Step 4: Deduct depreciation and net indirect taxes:
Consumption of fixed capital (ix) = 20 and net indirect taxes (vii) = 70.
\[ NDP_{FC} = GDP_{MP} - NIT - CFC = 1,880 - 70 - 20 \]
\[ NDP_{FC} = \text{Rs. } 1,790 \text{ crore} \]

Final Answer:
Net Domestic Product at Factor Cost is Rs. 1,790 crore.
\[ \boxed{NDP_{FC} = \text{Rs. } 1,790 \text{ crore}} \]