Arrange the following steps of calculation of National income in sequence.

(A) Deduction of intermediate cost

(B) Estimation of value of output

(C) Add net factor income from abroad

(D) Deduction of depreciation and NIT

Choose the correct answer from the options given below:

The correct option is (B), (A), (D), (C).

To calculate National Income using the Product (or Value Added) method, the steps must be followed in a logical sequence to transition from the initial gross production values to the final net national income. The detailed step-by-step sequence is explained below:

1. Step (B): Estimation of value of output
The first step in the process is to estimate the total gross value of all goods and services produced by all producing sectors (primary, secondary, and tertiary) within the domestic territory of a country during an accounting year. This value is known as the Value of Output.

2. Step (A): Deduction of intermediate cost
To avoid the error of double counting, we must subtract the value of intermediate consumption (the cost of raw materials and non-factor inputs used in the production process) from the Value of Output. This subtraction yields the Gross Domestic Product at Market Price (${\text{GDP}}_{\text{MP}}$).

${\mathrm{GDP}}_{\mathrm{MP}}=\text{Value of Output}-\text{Intermediate Cost}$

3. Step (D): Deduction of depreciation and NIT
To convert the gross domestic product at market price into net domestic income at factor cost, two deductions are made:
• Deducting Depreciation (consumption of fixed capital) converts the value from "Gross" to "Net" (${\text{NDP}}_{\text{MP}}$).
• Deducting Net Indirect Taxes (NIT) (Indirect Taxes − Subsidies) adjusts the value from "Market Price" to "Factor Cost".
This step results in the Net Domestic Product at Factor Cost (${\text{NDP}}_{\text{FC}}$), which represents domestic income.

${\mathrm{NDP}}_{\mathrm{FC}}={\mathrm{GDP}}_{\mathrm{MP}}-\text{Depreciation}-\text{Net Indirect Taxes (NIT)}$

4. Step (C): Add net factor income from abroad
Finally, to transition from the domestic concept to the national concept, we add the Net Factor Income from Abroad (NFIA) to the domestic income (${\text{NDP}}_{\text{FC}}$). This adjustment yields the Net National Product at Factor Cost (${\text{NNP}}_{\text{FC}}$), which is the National Income.

$\text{National Income (}{\mathrm{NNP}}_{\mathrm{FC}}\text{)}={\mathrm{NDP}}_{\mathrm{FC}}+\text{Net Factor Income from Abroad (NFIA)}$

Consequently, the correct chronological sequence for calculating National Income is (B), (A), (D), (C).