Rupesh Nair-K08056

National Income
&
Economic Survey
National Income: - The National Income can be defined the value of the total final output produced
in the various sectors of the economy such as agriculture, industry, transport, trade, banking etc. along
with the distribution of factor incomes among the different groups and final expenditure of the
economy.

Theories of National Income

 GROSS NATIONAL PRODUCT (GNP):
This is the total money value of all goods and services produced by a country in a year

GNP = GDP + NFIA

GNP = Gross National Product
GDP = Gross Domestic Product
NFIA = Net Factor Income from Abroad

 GROSS DOMESTIC PRODUCT (GDP):

It is the total money value of all the goods and services produced in the domestic territory at
a given period of time.

GDP = GNP - NFIA

GDP = Gross Domestic Product
GNP = Gross National Product
NFIA = Net Factor Income from Abroad

 Net National Product (NNP):

This is the value obtained by deducting depreciation from GNP;
NNP = GNP - Depreciation

 NET FACTOR INCOME FROM ABROAD (NFIA):

This is the difference between factor income received from abroad by Normal residents and
factor income of non-residents in domestic territory.

 NET DOMESTIC PRODUCT (NDP):

This is the value obtained by deducting depreciation from GDP;
NDP = GDP - Depreciation

The three methods used to calculate National Income: -

Product method: -

 The final value of goods and services of various sectors are taken and recorded.
 Then we determine the cost of materials that were for goods and of services rendered to these
sectors by other sectors of production and also the annual value of the physical depreciation
of the plants and equipment used in these sectors.
 Now we deduct these costs and depreciation value from the gross value of production to get
the net value of domestic output.
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 Then the amount obtained is to be added to the calculated NFIA (Net Foreign Income from
Abroad)

NI = Total wage + Total Rent + Total Interest + Total Profit

Income Method: -

 This includes income from all sectors.

 It comprises of wages earned by the workers and salaries of employees. The earning of the
self-employed persons, dividends of the shareholders and undistributed corporate profits,
rent of land, factories and business premises, interest on capital and earnings of public
enterprises.
 The income that is so estimated under such various heads are then added together to reach
at an estimate of the total national income.

Expenditure Method: -

 In this method all the expenses or consumptions(C) are calculated and then the NFIA (Net
Foreign Income from Abroad) (I) is considered.
 The expenses include:
1. Personal consumption expenditure of households
2. The gross private domestic investment, i.e. business spending on capital goods.
3. Government purchases of goods and services.

NI = C + I

National Income Committee: -

According to the National Income Committee; the Income Method and the Product Method are used
in India for estimating National Income.

In the agricultural and industrial sectors of the economy, the product method was used and the net
value of production during the year was calculated and accounted into the national income.

In the fields of commerce, transport, banking and the services, income method is used.

This Committee divided the entire economy into 13 sectors. Income from the six sectors, i.e.
agriculture, animal husbandry, forestry, Fishery, mining and factory establishments was estimated by
the output method.

A sample of individual incomes is taken as the starting point and the total income generated in these
sectors is estimated by multiplying this representative income by the number of people working in
those fields. The sum total of the incomes generated in these various sectors of the economy is the
national income of the country.
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Central Statistical Organisation (CSO): -

The National Income Unit of the Central Statistical Organisation (CSO) estimates a major part of the
national incomes by the product method, e.g., in sectors like agriculture, animal husbandry, forestry,
fishing, mining and factory establishments. And the “income method” is used in the estimation of
national income in the case of other sectors.

Economic survey for 2014-2015

The Net national income for the year 2014-15 compared to the previous year 2013-14 is as below: -

Table 1.

Year Net National Income at market prices (current price) (in crores)
2013-2014 10056523
2014-2015 11217079
*the above values are advanced estimate values which might be different in the 2017-2018 survey
report as that will be having provisional estimate values

The Net National Income was 112.17 lakh crore during 2014-15, as against 100.56 lakh crore for the
year 2013- 14. In terms of growth rates, the national income registered a growth rate of 11.5% in
2014- 15 as against the previous year’s growth rate of 13.7%.
The following performances can be said to be the factors for the increase in the national income.

Performance during the year 2014-2015:

Table 2.

GDP 2013-2014 2014-2015

GDP (constant prices) (INR crores) 9,921,106 10,656,925

Growth (%) 6.9 7.4

GDP performance of 2014-2015 from the demand side that comprises of the consumption, investment
and net exports.

 Growth of private final consumption increased to 7.6% in 2014-2015 from 6.5%.

 Exports in 2014-2015 recorded a growth of just 0.9% as compared to 7.3% in 2013-2014. The
imports increased from -8.4% in 2013-14 to -0.5% in 2014-15. [This happened mainly due to
the steep decline in international oil prices in the current year.

Fig 1.
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Sector-wise performance of GDP: -

Agriculture: -

India during this period showed significant growth & exports of commodities like cotton, rice, meat,
oil meals, pepper & sugar.

The share of agriculture in total GDP for the year 2013-14 was 18% whereas the growth was 3.7% and
the growth for 2014-15 was 1.1%.

As per the WTO’s Trade Statistics, the share of India’s agricultural exports was 2.46% and imports was
1.46% in the world trade.

Industrial, Corporate and Infrastructure Performance: -

Table 3

Sectors 2013-14 2014-15

Mining -1.5 1.7
Manufacturing -0.4 1.2
Electricity 5.6 10
Petroleum (million metric tonnes) 28.4 28.2
Coal (million tonnes) 565.8 630.25
*% increases Fig 2.

Manufacturing outputs increased by 3.9% in the first quarter and 0.4% in the second quarter. Due to
this low growth in the manufacturing sector there was increase in interest rates and low domestic and
external demand.

Service Sector: -

The service sector showed the highest growth during this period. Reasons for this growth are:

 Increase in demand of transport, communication lead to expansion of tertiary sector.

 Rapid growth of IT service has also proved of great expansion in the tertiary sector.
 Defence, civil administration, economic and Social service like health, education, etc., also
have made high contributions to the service sector.
 All these can be said has increased due to increase in income of the people.

Economic survey for 2015-2016

The Net national income for the year 2015-16 compared to the previous year 2014-15 is as below: -

Table 4.

Year Net National Income at market prices (current price) (in crores)
2014-2015 11007592
2015-2016 11961524
*here the value for 2014-2015 might differ from the one above as this is a First revised estimate and
the 2015-16 value is an Advance estimate
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It can be seen that there hasn’t been a significant high increase in the net national income from the
period 2014-15 to 2015-16.

Sector wise performance: -

Agriculture: -
During this period the agricultural growth was low compared to the previous years. Growth rates in
agriculture have been fluctuating at 1.5 per cent in 2012- 13, 4.2 per cent in 2013-14, and (-) 0.2 per
cent in 2014-15.
As per CSO, the growth in the agriculture, forestry and fishing sector is estimated at 1.1 per cent in
2015-16.

Its share in the Gross Domestic Product (GDP) was 17.4 per cent in 2014-15 (First Revised Estimates)
Service Sector: -

Service sector for India’s economic growth, contributed almost 66.1 per cent of its gross value added
growth in 2015-16, important net foreign exchange earner and it is the most attractive sector for
foreign direct investment inflows.

The GDP performance during this period: -

Table 5.

Year GDP at current prices

2014-2015 12488205
2015-2016 13567192

Fig 3.

Economic survey for 2017-2018

The Net National Income for the year 2017-18 compared to the previous year: -

Table 6

Year Net National Income at market prices (current price) (in crores)
2016-2017 13408211
2017-2018 14710563
*here the data for 2016-17 is provisional estimate and the 2017-18 figures are first advance estimates
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The CSO had estimated a 6.75% growth in GDP in 2017-2018 compared to the 7% growth in the year
2016-2017.

The agricultural and industrial sector were expected to grow at 2.1% and the industrial sector by 4.4%;
while the service sector was estimated to grow at 8.3%.

Fig 4.

The contribution and performance of various sectors during this period: -

Agriculture: -

Growth rates of agriculture sectors have been fluctuating over past many years. It was 4.9% in 2016-
17 and a estimate of 6.5% in 2017-18.

The uncertainty in growth in agriculture is mainly because that 50% of agriculture is dependent on
rainfall. For example, as there was good monsoon rainfall during 2016-17, there was a rise in
agricultural production.

Industrial and Infrastructure sector: -

Industrial growth: - The overall industrial sector growth was 5.8% in the second quarter of 2017-18 as
compared to 1.6% in the first quarter. As per the estimate of national income 2017-18, industrial
sector grew at 4.4% and the manufacturing sector grew at 4.6%. The eight core industries (coal, crude
oil, natural gas, petroleum refinery products, fertilizers, steel, cement, and electricity) grew by 4.6%
in 2016-17 as compared to 3.3% in 2015-16.

Fig 5.
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Infrastructure: - India requires around USD 4.5 trillion worth of investments till 2040 to develop
infrastructure. As per the current trend, India can raise around USD 3.9 trillion. The under investment
in the infrastructure sector has been due to:
(i) collapse of Public Private Partnerships.
(ii) stressed balance sheets of private companies.
(iii) delays in acquisition of land and forest clearances.

Service Sector: -

The services sector contributed 55.2% to India’s GVA in 2017-18. As per the CSO the growth of the
services sector is expected to be 8.3% in 2017-18 as compared to 7.7% in 2016-17
With a share of 3.4%, India is the eighth largest exporter of commercial services.

Major takeaways of the 2017-18 Survey: -

GST: -

 The introduction of the transformational Goods and Services Tax (GST) reform on July 1, 2017.
 Due to its introduction, the number of unique indirect taxpayers increased by over 50% (3.4
million).
 Voluntary compliance also increased under GST, with 1.7 million voluntary registrants. 13%
of the estimated 71 million non-agriculture enterprises were registered under the GST
network.
The survey based on new GST data also provides a close look at the firm-level exports and states that
India ‘s exports are unusual and that the largest firms account for a much smaller share of exports
than in other comparable countries Export concentration by firms is much lower in India than in the
US, Germany, Brazil, or Mexico

Trends & Analysis

 Net national Income & Per Capita Income for 8 previous periods:

Fig 7.

Year Net National Income Per capita net national

(current prices) income
(current prices)
2011-12 7742330 63462
2012-13 8766345 70983
2013-14 9897663 79118
2014-15 10953761 86454
2015-16 12076882 94130
2016-17 13408211 103219
2017-18 14710563 111782
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 The following trends can be seen in the Net national income for the above mentioned time
periods: -
Chart 1.

Net national income

16000000 14710563
13408211
NNI CURRENT PRICES (CRORES)

14000000
12076882
12000000 10953761
9897663
10000000 8766345
7742330
8000000
6000000
4000000
2000000
0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
YEAR

*the trend line shows the increase in the NNI

 The following trends can be seen in the Per Capita Net National income for the above
mentioned time periods: -

Chart 2.

Per capita net national income

120000 111782
PER CAPITA NET NATIONAL INCOME

103219
94130
(CURRENT PRICES IN CRORES)

100000
86454
79118
80000 70983
63462
60000

40000

20000

0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
YEAR

*the trend line shows the increase in the Per capita Net National Income
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 Trends in Per Capita Income: -

 The per capita income in India has not grown at a pace at which national income has
risen.

 There has, thus been only about six-time increase in per capita income over this long
period of over six decades till 2011-12.

 The main reason for this slow growth is population explosion in India during this
period. Under the new series per capita income increased from Rs. 64,316 in 2011-
12 to Rs. 74,193 in 2014-15 as there has been an increase in GDP which in turn has
increased per capita income.

 This increase can be said has happened due to the increase in education and training,
good infrastructure and in a way restricting the population.

 Trends in the National Income: -

 Indian economy has shown a rapid growth of the tertiary sector while this growth
shown wasn’t relatively as high as that of few other advanced countries.

 One thing that is clear from the growth trend analysis seen above in chart 1. It can be
seen that there is higher growth pace.

Conclusion: -
The trends reflected in the growth of the national income of Indian economy has been sometimes
slow and irregular, but it is moving ahead gradually in a steady & planned manner.
Decline in the contribution of primary sector, increased contribution of territory sector and growing
contribution of secondary sector are the trends in the direction of development and progress.
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References

Fig 1-https://images.financialexpress.com/2016/02/point-3.jpg

Fig-2-https://images.financialexpress.com/2016/02/point-5.jpg

Fig-3-https://images.livemint.com/r/LiveMint/Period2/2017/02/01/Photos/Processed/w_GDP.jpg

Fig-4-https://timesofindia.indiatimes.com/realtime/Economic_Survey_2017_18.pdf

Fig-5-https://timesofindia.indiatimes.com/realtime/Economic_Survey_2017_18.pdf

https://www.indiabudget.gov.in/budget2017-2018/survey.asp

https://www.indiabudget.gov.in/budget2016-2017/survey.asp
https://www.indiabudget.gov.in/budget2015-2016/survey.asp

https://www.economicsdiscussion.net/national-income/measurement-of-national-income-3-
methods-and-their-uses/1825
https://www.economicsdiscussion.net/essays/national-income-essays/essay-on-the-national-
income-of-india/17605
https://www.worldwidejournals.com/indian-journal-of-applied-research-
(IJAR)/fileview/December_2015_1448965077__69.pdf

https://gujarat.pscnotes.com/paper-iii-economy/trend-in-national-income-and-per-capita-income/

https://talentkas.com/2018/12/28/module-1-national-income/

https://www.prsindia.org/report-summaries/economic-survey-2017-18

https://www.worldwidejournals.com/indian-journal-of-applied-research-(IJAR)/article/trends-in-
national-income-of-india/ODA5MQ==/?is=1