Which cost is considered for calculating the national income in India? 

The correct answer is Factor cost.

Key Points

• This refers to the cost of production factors (land, labor, capital, and entrepreneurship) used to produce goods and services, excluding indirect taxes and including subsidies.
• National income is often calculated at factor cost to reflect the income earned by factors of production, giving a more accurate measure of economic performance.
• It reflects the income earned by factors of production and provides a clear view of the economy's performance. 

Additional Information

• Product Cost:
  • This encompasses all costs associated with the production of goods, including direct materials, direct labor, and manufacturing overhead.
  • While product cost can influence pricing and profit calculations, it is not directly used to calculate national income in the same way as factor cost.
• Market Cost:
  • This is the price at which goods and services are sold in the market, including taxes and excluding subsidies.
  • National income can be expressed in terms of market prices, but adjustments for taxes and subsidies are necessary to derive factor cost for a more accurate measure.
• Sunk Cost:
  • This refers to costs that have already been incurred and cannot be recovered. Sunk costs should not influence future economic decisions.
  • Sunk costs are not relevant for calculating national income, as they do not reflect current production or income generation.