Methods of Measuring National Income -National income methods

Methods of Measuring National Income (NNPFC)
Compensation of Employees :-
Salary and wages in cash,
Salary and wages in kind,
Contribution to social security schemes.
Income from property
i) Rent
ii) Royalty
iii) Interest
2. Income from entrepreneurship
i) Profit
a) Dividend
b) Corporate Tax
c) Retained earnings
d) Undistributed profits

Net Factor Income from Abroad
Private final consumption expenditure

1. B.Com (H) Indian Economy 888301 National Income Methods By Dr Vandana Malviya

2. Methods of M easuring N ational Income (NNP FC )

3. Income method

4. Compensation of Employees :- Salary and wages in cash, Salary and wages in kind, Contribution to social security schemes.

5. Operating Surplus :- I ncome from property i ) Rent ii) Royalty iii) Interest 2. Income from entrepreneurship i ) Profit a) Dividend b) Corporate Tax c) Retained earnings d) Undistributed profits

6. Mixed income of self employed People who earn a living by selling their services or output, but who are not employed by ay incorporated business. Income from work, property and entrepreneurship

7. NDP FC + Net Factor Income from Abroad (NFIA) = NNP FC

8. P recautions To estimate NI correctly by Income Method, following precautions must be taken: Value of production for self consumption should be included. Imputed rent of self occupied building should be included. Transfer payment should not be included. Corporation tax should not be included separately. Windfall gains, such as income from lotteries should be excluded. Illegal incomes such as income of smugglers, black marketers, etc. should be excluded. Wealth tax, estate duties, gift tax are paid out of current income, these should be excluded from NI.

9. Expenditure Method

10. Private final consumption expenditure Expenditure on durable goods and services. Imputed gross rent of owner occupied buildings Food grains and other items produced for final consumption Wages and salaries Non Durable goods and Services received in kind Net value gifts received in kind EXCLUDING:- Sale of second hand goods Sale of scraps and wastes.

11. Private final investment expenditure:- Investment a) Investment by households, b) Investment by government, c) Investment on residential construction by household. Change in Stock Closing stock – Opening stock

12. Government final expenditure:- Expenditure on Intermediate consumption Wages and salaries in cash and kind Consumption of Fixed Capital Expenditure on direct purchase of goods and services abroad EXCLUDING:- Receipts from sale of goods and services by the government.

13. Net Exports:- Export – Import.

14. Precautions:- The following precautions should be taken while using expenditure method: Expenditure on intermediate goods or semi finished goods and second hands good should be excluded. Expenditure on acquisition of finance capital should not be included. Government expenditure on old age pensions, unemployment allowances, scholarships, etc., should be excluded.

15. Output Method/Value Added Method Gross value added = Value of output - Value of intermediate product

16. GVA (Gross Value Added) GVA of Primary sector + GVA of Secondary sector + GVA of Tertiary sector GVA MP = GDP MP GVA MP = Gross Value Added at Market Price GDP MP = Gross Domestic Product at Market Price

17. GVA of Primary sector 1. Agriculture 2. Allied activities GVA of Secondary sector 1. Manufacturing 2. Construction GVA of Tertiary sector 1. Various types of services.

18. GDP MP - Depreciation + Net Factor Income from Abroad (NFIA) + Net Indirect Taxes (Indirect Taxes – Subsidies) = NNP FC

19. Precautions The following precautions should be taken while estimating NI by Output method: Only the value of final goods and services should be included. The value of goods retained for self use sholud be included in NI. Imputed rent of owner occupied building should be included in NI. Leisure time and illegal activities are not included in NI Own account production of fixed capital by government, firms and households should be included in NI.

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