National income value added method

economics

1. By : Dhirendra Chauhan National Income Part-2

2. “ M ethods o f M easuring “ National Income

3. There are 3 Methods of measuring National Income Value added method or product method Income method Expenditure method

4. Value added method “Value added method is the method which measures domestic income by estimating the contribution of each producing enterprise in the domestic territory of the country in an accounting year”

5. Inter Relationship of Different Concepts Gross Domestic Product MP Net National FC National - NFIA FC + NIT MP - NIT Domestic + NFIA Net + dep. Gross - dep.

6. Step “value added method involves the following steps” Classification of Production Units Identify all the production units in the domestic economy and classify them into three sectors such as primary , secondary and tertiary

7. 2. Estimation of Gross Value Added (GVA) by Each Producing Enterprise Value added Value added is the addition is the difference between value of firms output and the value of intermediate consumption Value added by each production unit is know as Gross Value Added at Market Price ( GVA MP ) GVA MP = Value of Output - Intermediate Consumption

8. Value of Output Value of output refers to market value of commodities produced by a firm during a period of one year. Value of Output = P x Q P = Price per unit Q = Quantity

9. 3. Measurement of Value of Outpu t Value of output = Sales OR Value of Output = Sales + Change in Stock( Δ S) Δ stock = Closing stock – Opening stock

10. “Sales” Domestic Sales + Export And “Intermediate Consumption “ Purchases of raw material form domestic market + Imports

11. Intermediate Consumption Value of non- factor inputs( land , labour , capital, entrepreneurship) used in the production is termed as intermediate consumption Generally it includes raw material, fuel, power etc.

12. Estimation of National Income Net factor income from abroad( NFIA ) is added , depreciation and net indirect taxes are subtracted to GDP MP to arrive at NNP FC or Nation Income Nation Income = GDP MP – D + NFIA – NIT ( NNP FC )

13. Thank You