National Income

General Definition
The money value of all goods & services
produced in a country during a given
period of time usually one year is called
the income of that nation.
Product Definition
GNP

Income Definition
GNI
Expenditure Definition
GNE
GNP = GNI = GNE

Problems associated with

measuring
NI
in
India
Large Population
Illiteracy
Varied Measuring units
Barter system
Variety of Economic Activities
many organizations to measure
No coordination
officially C.S.O

The Three Methods of

Measuring NI

1) Product Method:
Goods & Services are denoted by
Per unit Price is denoted by
Money value of the above G & S is
Q
Say there are N no of varieties of G
n
Therefore NI = NP = Pi Qi
i=1

Q
P
= Px
&S

2) Income Method of NI

Households are the owners of Inputs

L,L,K & O and They get their incomes as
Rent (R) Wages (W)
Rate of Interest (I) and Normal Profit (NP).
Therefore , assuming a nation as a
combination of Land, Labor, Capital &
organization , we get
NI = R + W + I + NP

3) Expenditure Method of NI
This is given by Prof.A.C.Pigou .
One Mans income is another mans
expenditure
NI = Y = CE + IE + GE + NFE
Consumption Expenditure
Investment Expenditure
Government Expenditure
Net of Foreign Expenditure
Where
Y is Income

The Three Equations

The following expressions will explain all
concepts.
1.Gross value Depreciation = Net
Value
2. Value @ Factor cost + Net Indirect
Taxes
= Value @
Market Prices

Concepts of NI
Gross Domestic Product GDP
Gross National Product
GNP
Net National Product
NNP
Net Domestic Product NDP
GDP / GNP at Factor Cost (FC)
at Market Prices (MP)
at Constant Prices
(CP)
NNP /NDP at FC, at MP and at CP
Per Capita Income (PCI) , Disposable
Income (DI)

Measuring N.I w.r.f. to India

Economic activities in India are divided into

three sectors, namely ;
Primary Sector : Agriculture, Apiculture,
Floriculture,
Quarrying, Mining,
Horticulture,
Animal Husbandry, Dairying,
Livestock , Agri-business related.
Secondary Sector : All Manufacturing
industries
also known as Manufacturing Sector

What methods are applied in

India?

In India output method is applied for

the
Primary and Secondary Sectors
and
Income method is applied for the
Services Sector.

Expenditure method cannot be applied

for a
heavy populated country like
India.