National income

this ppt includes throught information regarding national income.

1. National income By J uili S alvi M.A. ECONOMICS

2. introduction National income is the total value of a country’s final output of all new goods and services produced in one year. After independence, the government of India appointed the national income committee in august 1949, under the chairmanship of prof. p.c. mahalanobies, to compile authoritative estimates of national income. National income estimates are related with the financial year(April 1 to 31 st March). At present estimation of national income is based on the base year of 2004-2005.

3. National income includes the contribution of three sectors :- primary sector, secondary sector, tertiary sector. Under primary sector :- Agriculture, forest, fisheries and allied sector are included. Under secondary sector :- manufacturing, construction, electricity, gas and water supply are included. Under tertiary sector :- trade, transport, communication, banking, insurance, real estate, community and personal services are included.

4. Concept of national income

5. Gross domestic product GDP is the sum of money value of all final goods and services produced within the domestic territories of a country during an accounting year. GDP= C + I + G (X-M) GDP at market price :- includes the final value of goods and services also includes indirect taxes and excludes the subsidies given by the government. GDP at factor cost :- is the money value of final goods and services based on the cost involved in the process of production. GDP at factor cost= GDP at market price - indirect taxes + subsidies

6. Gross national product GNP is the aggregate final output of citizens and business of an economy in a year. GNP may be defined as the sum of gross domestic product and net factor income from abroad (NFIA) GNP= GDP + NFTA GNP= C + I + G + (X-M) + NFIA NFIA :- difference between income received from abroad for rendering factor services and income paid towards services rendered by foreign nationals in the domestic territory of a country.

7. Net domestic product and net national product Net domestic product = GDP- depreciation Net national product = GDP- depreciation + NFIA 0r GNP- depreciation Thus NNP is the actual addition to a year’s wealth and is the sum of consumption expenditure, govt expenditure, net foreign expenditure and investment less depreciation, plus net income earned from abroad= C+I+G+(X-M)-depreciation +NFIA NNP at factor cost is the sun total of income earned by all the people of the national boundaries or abroad. It is also called national income NNP at factor cost= NNP at market price – indirect taxes + subsidies

8. Per capita income and personal income Per capita income is the average income of the people of a country in a particular year. Per capita income= national income/ total population Personal income is the total income received by the individuals of a country from all sources before direct taxes in one year. Personal income = national income- undistributed corporate profits- corporate taxes – social security contributes + transfer payment Personal disposable income is the income which can be spent on consumption by individual and families. Personal disposable income = personal income – personal taxes

9. Methods to measure national income For measuring national income in India, in 1868, the first attempt was made by dada bhai nauroji. He in his book “poverty and Un- British rule in India” estimated income per capita annual income at a level of rs. 20 There are three methods of measuring national income as follows :- Expenditure method ( measuring the amount purchased):- while using expenditure method, the distinction should be drawn between intermediate goods and final foods. Goods which are used directly to satisfy economic wants of the people are referred as final goods. On the other hand goods which are used to produced these final goods or other goods are referred as intermediate goods. Expenditure method measures economic activity by summing up the value of expenditure on final goods. Expenditure on intermediate goods are excluded here to avoid double counting, as this expenditure is already considered into final expenditure.

10. Out put method (measuring the amount produced) :- this method is also called as value added method as this method measures economic activity by summing up the value added by all firms. The difference between the price at which the commodity is sold and the cost of intermediate goods used to produce that commodity is referred to value added by the process of production of that commodity. Income method (measuring the amount earned) :- income method takes into account all the factors of production to estimate the value of economic activities ( national income) in the economy.

11. Conclusion National income of India is influenced by its concepts viz.GDP, GNP, NDP and NNP. Indian economy is growing faster because of faster growth of its national income. Thus all the above factors play a very vital role in development of any economy.