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Exercises · Q10

Q.Which method of measuring national income would be most suitable for estimating the contribution of

(i) the agricultural sector, and
(ii) the government sector, to India's GDP? Give reasons.
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Agricultural sector → Product (Value Added) Method. Reasonably reliable data exist on the physical quantity of crops produced and their market prices (through agricultural marketing boards, mandis and government minimum support price records), making it practical to calculate the value of output and subtract the value of seeds, fertiliser and other purchased inputs (intermediate consumption) to arrive at Gross Value Added. The income method is far harder to apply here because most farming in India is carried out by self-employed cultivators whose earnings are "mixed income" — not cleanly separable into wages, rent, interest and profit — and proper income records are rarely kept. …

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