CA Foundation · Business Economics · Indian Economy
In India's national income accounting, the Gross Value Added at basic prices of an economy is Rs 800 crore. Product taxes are Rs 90 crore and product subsidies are Rs 30 crore. What is the Gross Domestic Product at market prices?
GDP at market prices equals GVA at basic prices plus product taxes minus product subsidies. Here that is 800 plus 90 minus 30, giving Rs 860 crore. Subsidies must be deducted because they lower the market price relative to the basic price.
- ARs 920 crore
- BRs 740 crore
- CRs 860 croreCorrect
- DRs 800 crore
Explanation
GDP at market prices = GVA at basic prices + product taxes - product subsidies = 800 + 90 - 30 = Rs 860 crore. Rs 920 crore is wrong because it adds both taxes and subsidies instead of subtracting subsidies. Rs 740 crore results from subtracting taxes and subsidies in the wrong direction.
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