You'll have to add depreciation to it and convert it to gross domestic capital formation because it does have a effect on NDP at mp

Calculation of National Income by Expenditure Method: Treatment of Net Domestic Capital Formation

Introduction:
The expenditure method is one of the approaches used to calculate national income. It focuses on the total expenditure incurred on various goods and services produced within a country's borders during a specific period. Net domestic capital formation (NDCF) is an important component of this method as it represents the investment made in the domestic economy.

Treatment of Net Domestic Capital Formation:
Net domestic capital formation refers to the net increase in the stock of physical capital within a country's borders during a particular period. It includes investment in fixed assets such as machinery, buildings, and infrastructure, minus depreciation.

Inclusion in National Income Calculation:
Net domestic capital formation is included in the calculation of national income by the expenditure method. It is considered a part of the total expenditure made within the economy.

Calculation:
The calculation of national income by the expenditure method involves summing up the various components of expenditure, including consumption, investment, government expenditure, and net exports.

Net Domestic Capital Formation Conversion:
Net domestic capital formation (NDCF) does not directly change to Net Domestic Product at Market Price (NDP at MP). Instead, it is adjusted to arrive at NDP at MP by accounting for depreciation and indirect taxes. The conversion process involves the following steps:

1. Deducting Depreciation: Depreciation represents the gradual wear and tear of fixed assets. To obtain NDP at MP, the amount of depreciation is deducted from NDCF. This adjustment accounts for the capital consumed during the production process.

2. Adding Indirect Taxes: Indirect taxes, such as sales tax and excise duty, are included in the prices of goods and services. To arrive at NDP at MP, these taxes are added back to NDCF to eliminate their impact on the final prices of goods and services.

3. Adjusting for Subsidies: Subsidies provided by the government are deducted from the prices of goods and services. However, they are not directly accounted for in NDCF. Therefore, subsidies are added to NDCF to ensure consistency in the measurement of national income.

Final Calculation:
Once the adjustments for depreciation and indirect taxes are made, the resulting figure represents Net Domestic Product at Market Price (NDP at MP). This value reflects the net value of goods and services produced within the domestic economy, considering the impact of capital consumption and indirect taxes.

Conclusion:
In the calculation of national income by the expenditure method, net domestic capital formation is an important component that represents investment in the domestic economy. However, it does not directly convert to NDP at MP. Instead, it undergoes adjustments for depreciation and indirect taxes to arrive at the final value of NDP at MP.