With reference to the value added method for national income accounting consider the following state...........

Economic Affairs Growth and Indicators

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With reference to the value added method for national income accounting, consider the following statements:

1. Gross Value Added (GVA) at factor cost does not include any taxes.

2. GVA at basic prices excludes production taxes and includes production subsidies available on the commodity.

Which of the statement given above is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

GVA at basic prices will include production taxes and exclude production subsidies available on the commodity. On the other hand, GVA at factor cost includes no taxes and excludes no subsidies and GDP at market prices include both production and product taxes and excludes both production and product subsidies. The relationship between GVA at Factor Cost and GVA at Basic Prices is shown below: GVA at factor cost + (Production taxes less Production subsidies) = GVA at basic prices.