TOPIC NATIONAL INCOME

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2 CONTENTS 1.INTRODUCTION. 2.DEFINATION. 3.CONCEPT OF NATIONAL INCOME. 4.METHOD OF MEASURING NATIONAL INCOME. 5.USE OF VALUE ADDED AND INCOME METHOD. 6. PROBLEM IN ESTIMATING NATIONAL INCOME.

INTRODUCTION It means the total value of goods and services It means the total value of goods and services produced annually in a country. produced annually in a country. It includes payments made to all resources in It includes payments made to all resources in the form of wages, interest, rent and profits the form of wages, interest, rent and profits

DEFINATION: The net output of commodities and services The net output of commodities and services flowing during the year from the country’s flowing during the year from the country’s productive system in the hands of the productive system in the hands of the ultimate consumer. ultimate consumer.

1.GNP(GROSS NATIONAL PRODUCT). 2.GDP(GROSS DOMESTIC PRODUCT). 3.NNP(NET NATIONAL PRODUCT). 4.PI (PRIVATE INCOME.) 5.DI (DISPOSAL INCOME.) CONCEPTS OF NATIONAL INCOME CONCEPTS OF NATIONAL INCOME :

1.GNP(Gross National Product):  It is the value of the final goods and services produced in the economy in a given period of time.  There are two approaches to measure GNP: 1. Expenditure approach. 2. Income approach.  Equation of GNP is, GNP=C+I+G+Xn GNP=C+I+G+Xn where, where, C is personal consumption expenditure C is personal consumption expenditure I is gross private domestic investment I is gross private domestic investment G is government purchases of goods and services G is government purchases of goods and services Xn is net export Xn is net export

2.GDP(Gross domestic product): Income generated or earned by the factors of Income generated or earned by the factors of production within the country from its own production within the country from its own resources is called domestic income or domestic resources is called domestic income or domestic product.. product.. It includes wages,salaries, rents, interest, dividents.etc It includes wages,salaries, rents, interest, dividents.etc

3.NNP(NET NATIONAL PRODUCT): Net national product is the total output available for the use Net national product is the total output available for the use. 4. PRIVATE INCOME: Private income is income obtained by private Individuals from any source. private Individuals from any source.

5.DISPOSAL INCOME: D Disposal income or personal disposal income means the actual income which can be spent on consumption by individual and families. isposal income = consumption expenditure + savings

Methods of measuring National Income Value Added Method Value Added Method Income Method Income Method Expenditure method Expenditure method

Value Added Method Classify the industry into various industrial sectors Find the value output by an enterprise Subtract the intermediate consumption, depreciation and net indirect taxes from it, we will get the NVAFC by all enterprises of an industry Add them all and we will get the NVAFC by each industry. Then add NVAFC by every industry, we get NDPFC Now, add the net factor income from abroad to it and NATIONAL INCOME is obtained

Income method Classify the economy into various industrial sectors Classify the factor payments To measure the factor payments Adding the factor payment by various enterprises Summing up the incomes paid by various industries, we get NDP at factor cost Finally adding net factor income earned from abroad to NDPFC, we get NATIONAL INCOME

Expenditure Method Add various expenditures like final private consumption expenditure (C), government’s final consumption expenditure(G), gross domestic investment(I) and net exports (X-M) We get GDMP, deduct the depreciations from it and we will get the NDPMP. Now subtract net indirect taxes, we get NDPFC Lastly by adding net factor income from abroad to NDPFC we will get the NATIONAL INCOME.

Use of Value added method Agriculture & allied activities Agriculture & allied activities Forestry & logging Forestry & logging Fishing Fishing Mining Mining Registered manufacturing Registered manufacturing

Income method is used for:- Unregistered manufacturing Gas, electricity & water Banking & insurance Transport & communication Real estate Trade Defence Other services

INDIAUS Business efficiency Ranked 33rd. 100 Ranked 1st Economic importance2.1 Ranked 25th Ranked 1st GDP$4,164,000,000,000.00Ranked 5th in $13,060,000,000, Ranked 2nd in 2006 GDP (Per Capita)$3, per capita Ranked 121st in 2006 $43, per capita Ranked 3rd in Gross National income$477,000,000, Ranked 12th. $9,780,000,000, Ranked 1st. Human Development Index0.602 Ranked 128th Ranked 10th. Income distribution > Poorest 10%3.5% Ranked 22nd. 1.8% Ranked 85th. Income distribution > Richest 10%33.5% Ranked 38th. 30.5% Ranked 54th. Economic States :- INDIA V/S US

Gross national income of top 10 countries (most recent ) Units in billion dollars Countries US JAPAN GERMANY UK FRANCE CHINA ITALY CANADA SPAIN MEXICO

Problems in the estimation of National Income Statistical Problems Presence of subsistence sector Presence of subsistence sector Absence of accounting records Absence of accounting records No proper classification of economic activities No proper classification of economic activities Gaps in statistics Gaps in statistics Regional disparities Regional disparities Conceptual Problems Coverage of services Coverage of services Administrative services Administrative services