NDP at factor cost
Also called: NDPFC, net domestic factor income · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"
Meaning
NDP at factor cost (NDP_FC) is the total income earned by the factors of production within the domestic territory: wages, profits, rent and interest. It is "net" because depreciation has been subtracted. It is "at factor cost" because taxes and subsidies are left out.
NDP_FC = NDP_MP − net product taxes − net production taxes = wages + profits + rent + interest
Example
Firm A grows cotton worth ₹50. Firm B turns it into cloth that sells for ₹200. The firms pay wages of ₹80 (20 + 60) and earn profits of ₹120 (30 + 90). With no depreciation and no taxes, NDP_FC = 80 + 120 = ₹200.
Don't confuse with
- National income (NNP_FC): this equals NDP_FC + NFIA. For example, NDP_FC of ₹8,000 crore plus NFIA of ₹200 crore gives national income of ₹8,200 crore.
- GDP at market prices: this equals NDP_FC + depreciation + net indirect taxes, not NDP_FC alone.
Related concepts
- Gross National Product
- Net factor income from abroad
- Normal residents
- Domestic territory
- Net Domestic Product
- Net National Product
- GNP at factor cost
- National income
- Personal income
- Undistributed profits