National Income

What is National Income?  

"National Income is the money value of all goods and services produced in a country during a year³ It includes income from all the productive sectors
such as Agricultural, Industrial and Service Industry

Basic Concepts
Gross Domestic Product (GDP)  Gross National Product (GNP)  Net National Product (NNP)  Net Domestic Product (NDP) 

Gross Domestic Product (GDP) 

Gross Domestic Product (GDP) is the total value of output (goods and services) produced by the factors of production located within the country¶s boundary in a year. The factors of production may be owned by any one ± citizens or foreigners.

Gross National Product (GNP) 

Gross National Product (GNP) is the total value of output (goods and services) produced and income received in a year by domestic residents of a country. It includes profits earned from capital invested abroad. GNP ± Net income earned from abroad = GDP 

Net National Product (NNP)
Net National Product (NNP) is arrived at by making some adjustment, with regard to depreciation, in GNP  GNP ± Depreciation = NNP 

Net domestic product (NDP)
Net domestic product (NDP) is also arrived from GDP by making adjustment with regard to depreciation  GDP ± Depreciation = NDP 

Methods of calculating National Income
Production method  Income method  Expenditure method 

Production method
The sum total of products produced in these three sectors is the total output of the nation. The next step is to find out the value of these products in terms of money.  The money sent by Indian citizens working abroad is also added to this. Now we get the gross national income.  GNI = Money value of total goods and services + Income from abroad. 

Income Method   

The income received by the factors of production during a year can be obtained by adding rent to land, wages to labour, interest to capital and profit to organizations. This will be equal to the income of the nation Money sent by Indian citizens working abroad is also added to this. GNI = Rent + Wage + Interest + Profit + Income from abroad.

Expenditure Method 

Government as well as private individuals spend money for consumption and production purposes. The sum total of expenditure incurred in a country during a year will be equal to national income. GNI = Individual Expenditure + Government Expenditure. 

Difficulties/Limitations in calculating National Income 
 

 

Non availability of reliable statistics. The service of housewives is not included in the national income because this service is not sold in the market. Individuals do not keep correct account of their consumption. Illiteracy and ignorance. Lack of proper criteria for measuring the value of services.

Problems in calculating National Income 
    

Black Money NonNon-Monetization Growing Service Sector Household Services Social Services Environmental Cost

SUMMARY 
        

National Income is the money value of the total goods and services produced in a country during a year. National Income helps us to know the economic progress achieved and to make comparative study. Product method, Income method and Expenditure method are the three methods used for national income calculation. In India national income is calculated and published by the Central Statistical Organization (CSO). Net National Product, Per Capita Income etc., are some of the important concepts related to National Income.

Sign up to vote on this title
UsefulNot useful