National Income-1

Methods for National Income Estimation
1. Income Method
2. Value Added Method
Value of Output = Sales + Change in Stock

GVA at MP = Value of Output-Intermediate Consumption
National Income (NNPatFC) = GVA at MP – consumption of fixed
capital - Net indirect tax + NFIA
Sales = Domestic Sales + Exports
Intermediate Consumption = domestic intermediate consumption + Imports = single
use producer goods = raw materials purchased
Sales = Sales to households + Sales to other firms + Exports
Sales = Sales to households + Production for self-consumption + Sales to other firms
+ Exports
3. Expenditure Method
Components of Final Expenditure
(GDP at MP)
Investment
Private final government final net exports
expenditure/gross
consumption consumtion
domestic capital (X-M)
expenditure expenditure
formation
gross fixed capital inventory investment

formation (closing stock-opening stock)
business fixed public fixed

investment investment
fixed investment by
households
Private Income = Income from domestic product accruing to private sector + Net
factor income from abroad + All types of transfer incomes
Private income = National Income – Income from domestic product accruing to

Government Sector + Transfer incomes
Private income = Private sector income + NFIA + All transfer incomes
Personal income = Private income - corporate tax - Undistributed profit
Personal income = National income – Income of govt. (public) sector –

Corporate tax – Undistributed profit + All types of transfer incomes
Personal income = Domestic income – Income from domestic product accruing

to govt. sector – Corporate tax – Undistributed profit + NFIA + All types of
transfer incomes
Three main forms of transfer income used in numerical are:
(i) Interest on national debt

(ii) current transfers from government administrative departments and
(iii) net current transfers from rest of the world.
Numerical Questions : Income Method
1. Calculate a)Operating Surplus, and b)Domestic Income;
Items ₹ in Crore
i) Compensation of Employees 2,000
ii) Rent and interest 800
iii) Indirect Taxes 120
iv) Corporation tax 460
v) Consumption of fixed capital 100
vi) Subsidies 20
vii) Dividend 940
viii) Undistributed Profits 300
ix) Net Factor Income to abraod 150
x) Mixed Income 200
2. Calculate National Income
Items (₹ in crore)
i) Compensation of employees 2,000
ii) Profit 800
iii) Rent 300
iv) Interest 250
v) Mixed income of self employed 7000
vi) Net current transfers to abroad 200
vii) Net Exports – 100
viii) Net indirect taxes 1,500
ix) Net Factor income to abroad 60
x) Consumption of fixed capital 120

3. Calculate NNP at MP
Items (₹ in thousand crore)
1. Compensation of Employees 250
2. Mixed income of self employed 600
3. Profit 80
4. Rent 30
5. Interest 40
6. Net factor income to abroad – 10
7. Net exports 15
8. Consumption of fixed Capital 20
9. Net indirect taxes 10
10. Net current transfers to abroad 8
4. Calculate NNP at FC
1. Profit 1,000
2. Mixed Income of self employed 15,000
3. Dividends 200
4. Interest 400
5. Compensation of employees 7,000
6. Net factor income to abroad 100
7. consumption of fixed capital 400
8. Net exports – 200
9. Net Indirect taxes 800
10. Net Current transfers to rest of the

40
world
11. Rent 500

5. Find Net Domestic Product at Factor Cost
1. Rent 200
2. Net Current transfers to abroad 10
3. National debt interest 60
4. Corporate tax 100
5. Compensation of employees 900
6. Current transfers to government 150
7. Interest 400
8. Undistributed Profits 50
9. Dividend 250
10. Net Factor income to abroad – 10
11. Income accruing to government 120
6. Calculate NNP at MP
1. Net Factor Income to abroad – 10
3. Consumption of fixed capital 40
5. Corporate tax 30
6. Undistributed Profits 10
7. Interest 90
8. Rent 100
9. Dividends 20
10. Net Indirect tax 110
11. Social security contributions by employees 11

7. Find NNP at FC
(₹ in
Items
crore)
2. Wages and salaries 600
4. Rent 200
5. Transfer payments by government 70
6. Interest 300
7. Net domestic product at factor cost accruing to

400
government
8. Social security contributions by employers 100
9. Net factor income paid to abroad 50
10. Profits 300
8. Calculate OS
2. Indirect taxes 200
3. Consumption of fixed Capital 100
4. Subsidies 50
5. Gross Domestic Product at market price 600

9. Calculate the following
a. Net Domestic Income
b. Gross Domestic Income
c. National Income
d. NNP at MP
2. Subsidies 1800
3. Depreciation 1700
4. Mixed Income of self employed 28000
5. Operating surplus 10000
6. Net factor income from abroad – 300
10. Calculate national income
(₹ in
Items
crore)
1. Mixed income of self employed 200
2. Old age pension 20
3. Dividends 100
4. Operating surplus 900
5. Wages and Salaries 500
6. Profits 400
7. Employer’s contribution to social security

50
schemes
10. Net indirect tax 50

Numerical Questions: Value Added Method
1. Calculate:
a. GVA at MP
b. National Income
Items ₹ in lakh
(i) Value of Output:

800
a) Primary Sector
200
b) Secondary Sector
300
c) Tertiary Sector
(ii) Value of Intermediate inputs purchased by:

400
d) Primary Sector
100
e) Secondary Sector
50
f) Tertiary Sector
(iii) Indirect taxes paid by all sectors 50
(iv) Consumption of fixed capital of all sectors 80
(v) Factor income received by the residents from

10
rest of the world
(vi) Factor income paid to non-residents 20
(vii) Subsidies received by all sectors 20
2. Find NVA at FC
Items (₹ in lakh)
i) Durable use producer goods with a life span of 10 years 10
ii) Single use producer goods 5
iii) Sales 20
iv) Unsold output produced during the year 2
v) Taxes on production 1
3. Calculate the Net Value Added at Factor Cost:
S.N Items (₹ in lakh)
i) Goods and Service tax 25
ii) Consumption of fixed Capital 5
iii) Closing Stock 10
iv) Corporate tax 15
v) Opening stock 20
vi) Sales 540
vii) Purchase of raw materials 140
4. Calculate the Gross Value Added at Market Price
S.N Items (₹ in lakh)
i) Goods and service tax 40
ii) Consumption of fixed capital 15
iii) Closing stock 20
iv) Sales 700
v) Subsidy 5
vi) Intermediate consumption 400
vii) Opening Stock 10
5. Calculate gross value added at market price.
S.N Items (₹ lakh)
i) Goods and service tax 30
ii) Sales 800
iii) Depreciation 50
iv) Net Change in stocks – 40
v) Purchase of raw materials 360
vi) Corporate tax 10
6. From the following data, calculate value added by firm X and by firm Y:
i) Closing stock of firm X 20
ii) Closing stock of firm Y 15
iii) Opening stock of firm Y 10
iv) Opening stock of firm X 5
v) Sales by firm X 300
vi) Purchases by firm X from firm Y 100
vii) Purchases by firm Y from firm X 80
viii) Sales by firm Y 250
ix) Import of raw material by firm X 50
x) Exports by firm Y 30
7. Calculate Value Added by Firms A and B from the following data:
i) Purchases by Firm B from Firm A 40
ii) Sales by Firm B 80
iii) Imports by Firm B 10
iv) Rent paid by Firm B 5
v) Opening stock of Firm B 15
vi) Closing Stock of Firm B 20
vii) Purchases by Firm A from Firm B 20

viii) Closing Stock of Firm A 20
ix) Opening Stock of Firm A 10

8. Find GDP at MP
S.N Items ₹ crore
Intermediate consumption of:

a) Primary sector 500
i)
b) Secondary Sector 400
c) Tertiary Sector 300
Value of Output
a) Primary Sector 1000
ii)
ii) Rent 10
ix) Emoluments of Employees 400
v) Mixed Income 650
vi) Operating Surplus 300
vii) Net Factor Income from abroad – 20
viii) Interest 5
ix) Consumption of fixed capital 40
x) Net Indirect tax 10
9. Calculate Gross Domestic Product at market price
Net Value added at market price by:

i)
ii) Net Exports – 10
iii) Net Indirect tax 100

Value of Intermediate consumption in:
iv)
Consumption of fixed capital in:

v)
10. Find NVA at FC
1. Sales 800
2. Taxes on production 50
3. Depreciation 70
4. Opening Stock 100
5. Closing Stock 80
6. Intermediate cost 200

Numerical Questions: Expenditure Method
1. Find NNP at MP
1. Gross domestic fixed capital formation 400
2. Private final consumption expenditure 8000
3. Government final consumption

3000
expenditure
4. Change in Stock 50
9. Net current transfers from abroad 100
10. Dividend 100
2. Calculate national income

3. Net current transfers from rest of the world 100
4. Net imports 200
6. Government final consumption expenditure 3000
7. Gross domestic capital formation 1000
9. change in stock – 50
10. Mixed income 4000

11. Scholarship to students 80
3. Calculate NDP at FC
3. Exports 70
4. Imports 120
7. Change in stock 100
8. Factor income to abroad 40
9. Factor income from abroad 90
11. Subsidies 50
12. Net Current transfers to abraod (-) 30
1. Corporation tax 100
3. Personal income tax 120
5. Undistributed profits 50
6. Change in stocks – 20
7. Net Domestic fixed capital formation 120

8. Net Imports 10
11. Private Income 1000
5. Calculate Net National Product at Market Price:
3. Current transfers from government 30
8. Net Domestic Capital formation 80
6. Find Gross National Product at Market Price:
6. Net Domestic Capital Formation 200

7. Current transfers from government 40
8. Depreciation 100
9. Net Imports 30
1. Net imports 5
2. Net domestic capital formation 15
3. Personal Income 90
5. Corporate tax 25
7. Net factor income to abroad –5
8. Calculate Net Domestic Product at Market Price.
1. Private Final consumption expenditure 400
2. Opening stock 10
4. Imports 15

6. Net current transfers to rest of the world 5
8. Closing stock 20
9. Exports 10
9. Calculate Net National Product at Market Price
1. Transfers Payments by government 7
3. Net imports – 10
4. Net domestic fixed capital formation 60
8. Closing Stock 8
9. Opening stock 8
10. Depreciation 12
11. Corporate tax 60
12. Retained earnings of corporations 20

1. Personal tax 80
6. Corporate tax 50
7. Net Domestic fixed capital formation 70
9. Depreciation 14
10. Change in stocks – 10
11. Net imports 20

Numerical Questions: PI, PDI
1. Calculate Personal Income and PDI
Items Rs (Crores)
(a) Net Domestic Product at Factor 8000
Cost
(b) Net Factor Income from Abroad 200
(c) Undistributed Profit 1000
(d) Corporate Tax 500
(e) Interest Received by Households 1500
(f) Transfer Paid by Households 1200
(g) Transfer Income 300
(h) Personal Tax 500
2. calculate Personal Income and Personal Disposable Income.

Items Rs (crore)
Net Domestic Product at factor cost 8,000
Net Factor Income from abroad 200
Undisbursed Profit 1,000
Corporate Tax 500
Interest Received by Households 1,500
Interest Paid by Households 1,200
Transfer Income 300
Personal Tax 500
3. Calculate PDI
Items (Rs in Crores)

Net domestic product at factor cost 800
accruing to private sector
Current transfers from government 70
Savings of private corporate sector 200
Corporate tax 40
Direct taxes paid by households 30
Depreciation 60
NFIA 20
Net current transfers to rest of the world -10
4. Find Gross National Product at Market Price and Private Income:
(Rs. in crores)
(i) Private final consumption expenditure 800
(ii) Net current transfers to abroad 20
(iii) Net factor income to abroad -10
(iv) Government final consumption 300
expenditure
(v) Net indirect tax 150
(vi) Net domestic capital formation 200
(vii) Current transfers from government 40
(viii) Depreciation 100
(ix) Net imports 30
(x) Income accruing to government 90
(xi) National debt interest 50
Income Method
1. OS=2500; DI=4700
2. NNP at FC=10290
3. NNP at MP= 1020
4. NNP at FC= 23800
5. NDP at FC= 1900
6. NNP at MP= 1070
7. NNP at FC= 1450
8. OS= 50
9. a=62000; b=63700; c=61700; d=68900
10. NNP at FC= 1640
Value Added Method
1. GVA at MP = ₹750 lakh
NNP at FC = ₹630 lakh
2. NVA at FC = ₹ 15 lakh
3. NVA at FC = ₹ 360 lakh
4. GVA at MP = ₹ 310 lakh
5. GVA at MP = ₹ 400 Lakh
6. Value added by Firm X = ₹ 165 lakh
Value added by Firm Y = ₹ 175 lakh
7. Value Added by Firm A = ₹ 30
Value Added by Firm B = ₹ 35 lakh
8. GDP at MP = 1400 cr
9. GDP at MP = 2800 lakh
10. NVA at FC= 460 lakh
Expenditure Method
1. NNP at MP = ₹11430
2. National Income = 8800 – 150 – 800 + 50 = ₹7900 crore
3. NDP at FC = 9550 – 60 – (700 – 50) = ₹8840 crore
4. National Income = 1190 – 0 + (- 10) – 150 = ₹1030 crore
5. NNP at MP = 660 – 0 – 20 = ₹ 640 crore
6. GNP at MP = ₹ 1380 crore
7. NNP at FC = ₹ 125 crore
8. NDP at MP = ₹ 550
9. NNP at MP = ₹ 425 crore
10. NNP at FC = 670 crore
PI and PDI
1. PI=8500; PDI=6800
2. PI=7300; PDI= 6800
3. PDI= 680
4. GNP at MP= 1380; Private Income=1110

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Methods for National Income Estimation

2. Value Added Method

Value of Output = Sales + Change in Stock

gross fixed capital inventory investment

business fixed public fixed

Private income = National Income – Income from domestic product accruing to

Private income = Private sector income + NFIA + All transfer incomes

Personal income = Private income - corporate tax - Undistributed profit

Personal income = National income – Income of govt. (public) sector –

Personal income = Domestic income – Income from domestic product accruing

Three main forms of transfer income used in numerical are:

(i) Interest on national debt

i) Compensation of Employees 2,000

ii) Rent and interest 800

iii) Indirect Taxes 120

iv) Corporation tax 460

v) Consumption of fixed capital 100

vii) Dividend 940

viii) Undistributed Profits 300

ix) Net Factor Income to abraod 150

x) Mixed Income 200

2. Calculate National Income

i) Compensation of employees 2,000

ii) Profit 800

iii) Rent 300

iv) Interest 250

v) Mixed income of self employed 7000

vi) Net current transfers to abroad 200

vii) Net Exports – 100

viii) Net indirect taxes 1,500

ix) Net Factor income to abroad 60

x) Consumption of fixed capital 120

Items (₹ in thousand crore)

1. Compensation of Employees 250

2. Mixed income of self employed 600

6. Net factor income to abroad – 10

8. Consumption of fixed Capital 20

9. Net indirect taxes 10

10. Net current transfers to abroad 8

2. Mixed Income of self employed 15,000

5. Compensation of employees 7,000

6. Net factor income to abroad 100

7. consumption of fixed capital 400

8. Net exports – 200

9. Net Indirect taxes 800

10. Net Current transfers to rest of the

11. Rent 500

2. Net Current transfers to abroad 10

3. National debt interest 60

4. Corporate tax 100

5. Compensation of employees 900

6. Current transfers to government 150

10. Net Factor income to abroad – 10

11. Income accruing to government 120

1. Net Factor Income to abroad – 10

2. Net current transfers to abroad 5

3. Consumption of fixed capital 40

4. Compensation of employees 700

10. Net Indirect tax 110

11. Social security contributions by employees 11