CCE lesson for class 5 subject Hindi

CCE lesaon
Class- 5
Subject- Hindi
Chapter-1

For teachers who are making CCE lessons  of Hindi chapter 1.

Subsidies & National Income

Subsidies & National Income
Similar to the indirect taxes, the various subsidies which are forwarded by the governments need to
be adjusted while calculating national income. They are added to the national income at market cost,
in case of India9. Subsidies are added in the national income at the market cost to derive the national
income at factor cost . This is because the price at which the subsidised goods and services are made
available by the governments are not their real factor costs (subsidies are forwarded on the factor
costs of the goods and services) otherwise we will have a distorted value (which will be less than its
real value!). Thus the formula will be:
National Income at Factor Cost = NNP at Market Cost + Subsidies
If the national income is derived at the market cost and governments forward no subsidies there is no
need to adjustments for the subsidies – but after all there is not a single economy in the world today
which does not forward subsidies in one or the other form.
Putting ‘indirect taxes’ and the ‘subsidies’ both together India’s National Income will be derived with
the following formula (as India does it at the factor cost):
National Income at Factor Cost = NNP at Market Cost – Indirect Taxes + Subsidies

Taxes & National Income

Taxes & National Income
While accounting/calculating national income the taxes, direct taxes and indirect taxes collected by
the governments, needs to be considered. In case of India, to the extent the direct taxes (individual
income tax, corpoarate income tax i.e. the corporate tax, divident tax, interest tax, etc.) are concerned
there is no need of adjustment whether the national income is accounted at factor cost or market cost.
This is so because at both the ‘costs’ they have to be the same, besides these taxes are collected at the
incomes of the concerned person or group.
But the amount of indirect taxes (cenvat, customs, central sales tax, sales tax/vat, state excise, etc.)
needs to be taken care of if the national income is accounted at the ‘factor cost’ (which is the case
with India). If the national income is calculated at the factor cost then the corpus of the total indirect
taxes needs to be deducted from it. Why so? This is because, they have been added twice – once in
the hands of the people/group who pay them (because they pay for it from their ‘disposable income’
while puchasing things!) and other in the hands of the governments (as their income receipts).
Collection/source of the indirect taxes are the ‘disposable income’ (which individuals and
companies have with them after paying their direct taxes – from which they do any purchasing and
finally, the indirect taxes reach the various governments!). Thus, if the national income is calculated
at the factor cost, the formula to seek it will be:
National Income at Factor Cost = NNP at Market Cost – Indirect Taxes
However, if the national income is being derived at the ‘market cost’ the indirect taxes do not need to
be deducted from it. In this case, the governments need not add their income accruing from indirect
taxes to the national income either. It means, that the confusion in the case of national income
accounting at factor cost is only related with the indirect taxes.