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ECONOMICS

PRESENTATION
NATIONAL INCOME

GROUP MEMBERS Shweta Gawas (19) Jeeten Gupta (24) Abhishek Jain (31) Akshita Lukhi (43) Tejas Makwana (44) Nakul Mehra (48) Trupti Parab (54) .

. Whereas GDP refers to the income generated by production activities on the economic territory of the country. NNI is GNI net of depreciation. whether generated on the domestic territory or abroad. there are two other measures are generally preferred by analysts: per capita Gross National Income (GNI) and Net National Income (NNI). GNI measures the income earned by the residents of a country.INTRODUCTION While per capita gross domestic product is the indicator most commonly used to compare income levels.

rents. representing the sum of wages. . It is the total income of the economy during the year. interest.  The total net value of all goods and services produced within a nation over a specified period of time. NNI is equal to GNI net of depreciation. and pension payments to residents of the nation.  GNI is defined as GDP plus net receipts from abroad of wages and salaries and of property income plus net taxes and subsidies receivable from abroad.DEFINATIONS  National Income is the total money value of all goods and services produced in a during year. profits.

7. 6. The measurement of the size of the economy and level of country's economic performance. 4. To make projections about the future development trend of the economy. To make international comparison of people’s living standards . 8. To trace the trend or the speed of the economic growth in relation to previous years also in other countries. To know the composition and structure of the national income in terms of various sectors and the periodical variations in them. To fix various development targets for different sectors of the economy on the basis of the earlier performance To help businesses to forecast future demand for their products. 5. 3. 2. To help government formulate suitable development plans and policies to increase growth rates.The Importance of National Income : 1.

4. 5. Gross National Product (GNP) Gross of Domestic Product (GDP) Net National Product (NNP) National Income at Factor Cost (NIFC) Personal Income (PI) Disposable Personal Income (DPI) . 3. 6.Concepts Of National Income 1. 2.

is defined as the money value of the national production for any given period.N. Ina open economy GNP include the following :    The money value of the final goods and services produced in the economy to avoid double counting. Intermediate products are excluded from it. is a measure of the economy's productivity during the year.    The money value of only currently produced goods and services as G.   GNP = C + I + G + (X-M) + (R-P) . It is a monetary measures.P.P.Gross National Product (GNP) GNP refers to the aggregate market value of all final goods & services produced in a country during a year.N.  G.

This implies that whatever is produced in India by . but that part of income earned by Indians. Net factor income from abroad is an addition or a subtraction to GNP to arrive at GDP.Depreciation for the given year   It is also called national income at market prices. Net National Product (NNP) It refers to the net production of goods and services in a country during the year.P. Whatever earned by Indian citizens inside or outside the country from GNP. At the same time . less depreciation during the year.  NNP = GNP . . It is a useful concept in study of growth economics as it takes into consideration the net increase in the total production of the country.Gross of Domestic Product (GDP) GDP refers to the money value of goods and services produced within the Geographical boundaries of a country. Indian nationals & foreigners working in India will constitute GDP. income earned by Indians outside the country are not included. It is G.N. abroad has to be excluded to get GDP.

which form a part of his income but. Example. NIFC = NNP . such payments which are not made for any productive service is not included.   Therefore. etc.Indirect taxes + subsidies It does not include capital consumption allowance government business and individual transfer payments and indirect taxes. All these do not reach the factors of production. . since he has not rendered any service to get from them.an individual may get gifts.National Income at Factor Cost (NIFC) It is the total of all incomes earned by the owner of factors of production for their contribution of factors of production. for calculating it. transfer payments from business. they do not enter the calculation of national income at factor cost.

etc.P.I. dividends. and rents. so these have to be deducted from what is earned. is spent on consumption. It is the spendable income at current prices available to individuals.I. Disposable Personal Income (DPI) The whole of personal income is not available for consumption as personal direct taxes have to be paid.Personal Income (P. What is left after payment of personal direct taxes is call disposable personal income. profits. property taxes and insurance payments  This is the amount available for individuals and households for consumption. . It denotes aggregate money payments received by the people by way of wage. interest. Taxes and payment towards social security measured will not be available for individuals.  DPI = PI .  PI = NI – Corporate taxes – undistributed corporate profits – social security contributions + transfer payments Transfer payments may be by government or business transfers.personal taxes.) This is the actual income received by the individuals and households in the country from all sources. interest paid by government. It is not that the entire D.

Income Method 3.The various methods of calculating national income : There are three methods by which national income can be calculated: 1. Expenditure Method . Product Method 2.

 Agriculture industry  International transaction sector: in this sector. namely.   Direct sector: in this sector the value of services of such professions like doctors.monetized sector.  .. etc. The value added of a firm is its output less whatever it purchases from other firms such as raw materials. we take into account the value of goods exported and imported payment from abroad.   According to this method the economy is classified into different sectors. payments to other countries. But in under developed countries this method may give rise to various problems like imputation of money values to non. manufacturing. dramatics. However in advanced countries this method may be successful as it is very easy to get data from government records.Product Method This is also called the output method. soldiers. etc.   In each sector we make an inventory of goods produced and find out the end product making an addition to the value of goods. It consists of finding out the market value of all the goods and services produced during a year. trade. the inventory method or the census method. and other inputs. are taken by equating to their services. politicians. The value added method can be followed in order to avoid double counting.   This method has a merit because it helps us to have a comparative idea of the importance of various activities in economy like agriculture.

To arrive at the totality of income of nation. c) Earnings by way of interest. pensions are excluded. d) Income of joint stock companies. . salaries and all such earnings of person employed.Income Method This method refers to the gross national income obtained by adding together wages and salaries. b) Wages. profits and rents of persons and institution and including government incomes are earned either from property or through work. e) Income from overseas investment. interests. the following procedure will be adopted:   a) Net rents include the rental value of owner occupied houses. This method gives national income at factor cost.

. Expenditure by producers on investment of goods. In other words.Expenditure Method    This method is also called the flow of product approach (by American economist Samuelson) or the outlay method. income and total product Whichever method we use the result should be more or less the same. Expenditure by government on consumption as well as capital goods. Here we take into account the expenditure on finished products :   Expenditure by consumers on goods and services.   To this we add money received from abroad through trade and other payments. This figure thus arrived at will give us GNP   The merit of this method is that it believes in the identity between national expenditure. they can be used to cross-check reliability of each other.

The difficulties in calculation of national income : 1. 5. 2. 8. 3. 4. Non Monetary Measures Problem of Double Counting Petty Production Public Service Transfer Payment Conceptual Duties Difficulties in Value Estimation Inefficient Data Collection . 6. 7.