# On the basis of following data, prove that ‘Net Value Added at Factor Cost’ is equal to ‘Income Generated’

On the basis of following data, prove that ‘Net Value Added at Factor Cost’ is equal to ‘Income Generated’.

Particulars | â‚¹ in Crores |

(i) Addition to stock | 1,000 |

(ii) Sales | 10,000 |

(iii) Net indirect taxes | 800 |

(iv) Purchase of raw material | 1,650 |

(v) Expenses on Power | 850 |

(vi) Consumption of fixed capital | 500 |

(vii) Rent | 700 |

(viii) Compensation of Employees | 3,500 |

(ix) Interest | 1,000 |

(x) Dividend | 1,500 |

(xi) Corporate gains tax | 300 |

(xii) Undistributed profit | 200 |

Ans – Net Value Added at Factor Cost = Income Generated = â‚¹ 7,200 Crores

Solution;-

**Calculation of Net Value Added at Factor Cost**

Value of Output = Sales + Addition to Stock

Value of Output = â‚¹ 10,000 + â‚¹ 1,000

Value of Output = â‚¹ 11,000 Crores

Gross Value added at MP = Value of Output – Intermediate Consumption (Purchase of raw material + Expenses on Power)

Gross Value added at MP = â‚¹ 11,000 – (â‚¹ 1,650 + â‚¹ 850)

Gross Value added at MP = â‚¹ 8,500 Crores

Net Value Added at Factor Cost = Gross Value added at MP – Consumption of fixed Capital – Net indirect taxes

Net Value Added at Factor Cost = â‚¹ 8,500 – â‚¹ 500 – â‚¹ 800

**Net Value Added at Factor Cost = â‚¹ 7,200 Crores**

**Calculation of Income GeneratedÂ **

Income Generated (NDP at FC) = Compensation of Employees + Mixed Income + Rent + Interest + Profit (Corporate gains tax + Dividend + Undistributed profit)

Income Generated (NDP at FC) = â‚¹ 3,500 + â‚¹ 0 + â‚¹ 700 + â‚¹ 1,000 + (â‚¹ 300 + â‚¹ 1,500 + â‚¹ 200)

**Income Generated (NDP at FC) = â‚¹ 7,200 Crores**

Thus

**Net Value Added at Factor Cost = Income Generated (NDP at FC) = â‚¹ 7,200 Crores**