NATIONAL INCOME:
ü The
National income estimates are in relation with the financial year.
ü In
India the financial year begins on April 1 and ends on March 31.
ü The
National income measures the flow of goods and services in an economy.
ü Note:
The National income measured only on flow and not on stock.
ü The
National income measures of net volume of goods and services produced in a
country during a year.
And
ü It
also includes net earned foreign income.
ü The
National Income is counted without duplication.
ü The
National income
measures the productive power of an economy (flow).
ü The
National
wealth measures the stock of commodities held by the nationals of a
country at a given point of time.
WHAT HAPPENED BEFORE
INDEPENDENCE?
ü No
specific amendments were made.
ü The
1st attempt was made by Dada Bhai Naoroji (Grand Old Man of India) in
the year 1868 in his book ‘Poverty and Un British Rule in India’.
ü He
estimated that the per capita annual income as Rs. 20 per annum.
ü Other
estimators William Digby in the year 1899, Findlay Shirras in 1911, 1922 and in
1933, Shah and Khambatta in 1921, V K R V Rao during 1925-29 and 1931-32 and R
C Desai during 1931-40.
ü The
above people estimated the national income with the value of the output of the
agriculture sector and then added a certain percentage as the income of the
non-agriculture sector.
ü The
estimates suffered with serious limitations.
AFTER INDEPENDENCE:
ü In
August 1949 the Government of India appointed the National Income Committee.
ü Prof.
P C Mahalanobis was appointed as the chairman of the National Income Committee.
ü The
other 2 members of the committee were Prof D. R Gadgil and Prof V K R V Rao.
ü The
main job of the committee was to compile estimates of National Income.
ü The
1st report was submitted in the year 1951.
ü The
final report was submitted in the year 1954.
ü This
report is considered to be a landmark in the history of India as this is the
first time that it provided a comprehensive data of National Income for the
whole India.
ü The
government established the CSO (Central Statistical Organization) for further
estimation of the National income.
ü The
CSO regularly publishes the national income.
CONCEPT (THEORY) OF THE
NATIONAL INCOME:
ü GNP
(Gross National Product)
ü GDP
(Gross Domestic Product)
ü NNP
(Net National Product)
ü NI
(National Income)
ü PI
(Personal Income)
ü DPI
(Disposable Personal Income)
Now
let us try to understand the meaning of each:
GDP (GROSS
DOMESTIC PRODUCT):
ü The
Gross Domestic Product is the money value of all the goods and services produced within the
geographical boundaries of a country in a given period of time.
ü Note:
the GDP is only within the country.
*****
GNP (Gross National Product):
ü The
GNP is the money value of the goods and services produced by a country in a
given period of time
Plus (+)
ü Total
money value of goods and services produced by the nationals outside the country
Minus (-)
ü Incomes
received by the foreigners with in the country.
ü Note:
The GNP is calculated on the basis of market prices of produced goods, it also
includes indirect taxes and subsidies if any.
ü The
GNP is equal to GDP if the income earned and received by the citizens of a
country within the boundaries of foreign countries is equal to the income
received by the foreigners within the country.
*****
NNP (NET NATIONAL PRODUCT):
ü This
is GNP minus depreciation
ü NNP
= GNP – Depreciation
ü Note:
Depreciation is the consumption of capital stock
*****
NI (NATIONAL INCOME):
ü The
National income is also called Net National Product at factor cost.
ü Hence,
ü NI
= NNP minus (total indirect taxes + Subsidies)
ü Note:
Both indirect taxes and subsidies are deducted from the NNP.
*****
PI (PERSONAL INCOME):
ü This
is actual income obtained by the people after deducting various taxes.
ü PI
= National Income – (Corporate taxes + payments made for social security)
PLUS (+)
ü Government
transfer payments
PLUS (+)
ü Business
transfer payments
PLUS (+)
ü Net
interest paid by the government
*****
DPI (Disposable personal Income):
ü
This is the Personal income minus direct taxes.
ü
DPI = PI – Direct taxes
*****
HOW THE NATIONAL INCOME IS
MEASURED?
ü There
a 3 methods to calculate the National income.
ü These
methods are given by Simon Kuznets.
ü PM
(Product Method) or Product service method.
ü IM
(Income Method)
ü CM
(Consumption Method) or expenditure method.
ü In
India the
combination of Product method and Income methods is used for
calculating the National Income.
ü PRODUCT
METHOD:
·
NI = GDP
Minus (–)
·
income earned in
foreign countries
Minus (–)
·
Depreciation.
ü In
the Product method the GDP is taken into consideration.
ü Net
income earned in foreign countries is deducted from the GDP.
ü From
this the depreciation is subtracted.
ü INCOME METHOD:
ü In
this method the National Income is calculated by
·
National Income =
·
Total Rent
Plus (+)
·
Total wages
Plus (+)
·
Total Interest
Plus (+)
·
Total Profit
ü The
total net income of the people working in different sectors and commercial
sectors are taken into consideration.
ü Consumption
Method:
ü This
method is not generally used for calculating the National income.
ü According
to this method
·
National Income =
·
Total Consumption
Plus
·
Total Savings
MISCELLANEOUS:
ü The
per capita income in India is calculated by CSO (Central Statistical
Organization).
|
ü What is per capita
income?
ü This is National
income divided by the total population of the country.
|
ü According
the statistics released by the CSO in 2015, the per capita income in the country
reached Rs. 88538/- per annum . This is according to the data on current
prices.
ü The
PMEAC (Prime Minister’s Economic Advisory Council) in the ‘Economic Outlook’
released on August 1, 2011 lowered the economic growth rate projection from 9
percent to 8.2 percent.
ü The
PMEAC also reduced the manufacturing sector growth rate from 9 percent to 7
percent.
ü The
CSO has included the contributions of all the 3 sectors (Primary, secondary and
tertiary) in estimating the National income.