1.20 ndian onom
Putting ‘indirect taxes’ and ‘subsidies’ basic prices16 instead of factor cost. The
together, India’s National Income will thus be relationship between GVA at factor cost,
derived with the following formula (as India does GVA at basic prices, and GDP (at market
it at factor cost): prices) is given below:
National Income at Factor Cost = NNP at GVA at basic prices = CE + OS/MI +
Market Cost – Indirect Taxes + Subsidies CFC + production taxes less production
subsidies.
rEvision in thE BasE yEar anD GVA at factor cost = GVA at basic
mEthoD of national incomE prices – production taxes less production
accounting subsidies.
GDP = GVA at basic prices + product
The Central Statistics Office (CSO), in January
taxes – product subsidies.
2015, released the new and revised data of
National Accounts, effecting two changes: [Where, CE : compensation of employees;
OS: operating surplus; MI: mixed
1. The Base Year was revised from 2004–05
income; and CFC: consumption of fixed
to 2011–12. This was done in accordance
capital (i.e., depriciation). Production
with the recommendation of the National
Statistical Commission (NSC), which taxes or production subsidies are paid
had advised to revise the base year of all or received with relation to production
economic indices every five years. and are independent of the volume of
actual production. Some examples of
2. This time, the methodology of calculating
production taxes are land revenues, stamps
the National Accounts has also been
and registration fees and tax on profession.
revised in line with the requirements
Some production subsidies are subsidies
of the System of National Accounts
to Railways, input subsidies to farmers,
(SNA)-2008, an internationally accepted
subsidies to village and small industries,
standard.
administrative subsidies to corporations
The major changes incorporated in this revision or cooperatives, etc. Product taxes or
are as given below: subsidies are paid or received on per unit
(i) Headline growth rate will now be of the product. Some examples of product
measured by GDP at constant market prices, taxes are excise tax, sales tax, service tax
which will henceforth be referred to as and import and export duties. Product
‘GDP’ (as is the practice internationally). subsidies include food, petroleum and
Earlier, growth was measured in terms of fertilizer subsidies, interest subsidies given
growth rate in GDP at factor cost and at to farmers, households, etc., through
constant prices.
16. The basic price is the amount receivable by the
(ii) Sector-wise estimates of Gross Value producer from the purchaser for a unit of a good or
Added (GVA)15 will now be given at service produced as output minus any tax payable
(such as sales tax or VAT the buyer pays), and plus any
15. GVA, which measures the difference in value subsidy receivable, on that unit as a consequence of its
between the final good and the cost of ingredients production or sale; it excludes any transport charges
used in its production, widens the scope of capturing invoiced separately by the producer. In other words,
more economic activity than the earlier ‘factor cost’ the basic price is what the seller collects for the sale,
approach—a sum of the total cost of all factors used to as opposed to what the buyer pays.
produce a good or service, net of taxes and subsidies.