Problems while measuring National Income

Non-Monetized Transactions-
Goods and services having money value are included in the national
income but there are goods and services which may have no
corresponding flow of money payments. Exchange of goods and services which
have no monetary payments, like services rendered out of love, courtesy or kindness are difficult
to include in the computation of national income.

Problems of Double Counting –

While estimating the National income, the value of only final goods and
services is included. However the problem of double counting arises when
value of intermediate goods is also included along with the value of final
goods. So, double counting means a counting of an output more than
once in the process of several stages of production.

Inadequate data –
 Lack of adequate and reliable data is a major hurdle to the measurement of national
income of underdeveloped countries.

Excluded Market Transactions - the good or service must be

currently produced and must use up currently available scarce
resources. Many transactions are such that represent merely the
transfer of wealth (or claims to wealth) or the exchange of
commodities produced in some previous accounting period.

These excluded transactions relate to transfer payments,

capital gains, illegal activities, second hand sales etc.:

Depreciation-
Depreciation implies a reduction in the value of capital
stock or capital goods due to wear and tear, constant use
etc. During the process of production the wear and tear or
capital consumption occurs, resulting in, at the same time,
a decline in the relative efficiency of the plant and
equipment on account of obsolescence.
Existence of Barter System - Even in the modern era, barter system
continues to exist in the backward communities. People exchange goods
for goods and service are paid in kind. No transactions are not carried out
in monetary terms. Under these circumstances, a correct estimate of
national income is not possible