VALUE ADDED METHOD
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MEASUREMENT OF NATIONAL INCOME National Income is calculated by 3 ways: Value Added Method Income Method Expenditure Method
VALUE ADDED METHOD Rs.00 Wage(W) Interest(0) Profit(P) Rs.1 lakh Rs.5 lakh Rs. 10 lakh .Wage(W) Interest() Profit(P) Rent(R) Wage(W) Final product . Interest(I) Profit(P) Rent(R) Rent(R) Value Addition 5
STATEMENT : Provisional Estimates of National Income and Expenditures on GDP, 2016-17(A 2012 Prices) crore GDP calculation Method #2: Gross Value Added (GVA) 2014-152015-16 2016-17 percentage change (PE) over previous year 2015-16 2016-17 S. No. Item Domestic Product 719023 04014 8440 79 I GVA at basic prices 2 Net Taxes on Products including import817961890488004 89128 duties 3 GDP (I+2) 10536984 11381002 12189854| 8.0 71
VALUE ADDED METHOD It is also known as Production Method and Output Method It is used by the economists to calculate GDP at market prices, which is the total values of outputs produced at different stages of production. Calculation is done by taking the value of Final Goods and Services and not Intermediate goods as it will result in Double Counting
VALUE ADDED METHOD The following goods and services should be considered to be included in production: Goods and services actually sold in the market. Goods and services not sold but supplied free of cost.(No charge/ Complementary).
CALCULATION . Calculation is done which multiplies the final output with the market price This method is primarily used to calculate the GDP of the primary sector.
WHAT IS PRIMARY SECTOR? - Agriculture and allied serviced sector. - It is the sector of the economy that makes direct use of the natural sources to produce goods. natural resources Produces goods and services by exploiting natural " This sector is engaged in production and extraction of resources Example:Mining, Agriculture, Minerals, Fishing, etc.
CAVEAT Some of the goods and services are not included in production are: Sale or purchase of second hand goods. Example: Sale and purchase of second hand cars are not part of GDP calculation as no new production takes place in the economy. Production due to unwarranted illegal activities Transfer Payments such as scholarships, pensions,etc, are excluded as there is income received, but no goods or services is produced in return.