National Income General DefinitionThe money value of all goods & services produced in a country during a given period of time usually one year is called the income of that nation.• Product Definition GNP• Income Definition GNI• Expenditure Definition GNE

GNP = GNI = GNE

Problems associated with measuring NI in India

Large PopulationIlliteracyVaried Measuring unitsBarter system Variety of Economic Activities many organizations to measure No coordination officially C.S.O

The Three Methods of Measuring NI1) Product Method:Goods & Services are denoted by ‘Q’Per unit Price is denoted by ‘P’ Money value of the above G & S is = P x Q Say there are N no of varieties of G & S nTherefore NI = NP = ∑ Pi Qi i=1

2) Income Method of NI Households are the owners of Inputs L,L,K & O and They get their incomes as Rent (R) Wages (W) Rate of Interest (I) and Normal Profit (NP).Therefore , assuming a nation as a combination of Land, Labor, Capital & organization , we get NI = R + W + I + NP

3) Expenditure Method of NIThis is given by Prof.A.C.Pigou .

“ One Man’s income is another man’s expenditure” NI = Y = CE + IE + GE + NFE Consumption Expenditure Investment ExpenditureGovernment Expenditure Net of Foreign Expenditure Where Y is Income

The Three Equations The following expressions will explain all concepts. 1.Gross value – Depreciation = Net Value

2. Value @ Factor cost + Net Indirect Taxes = Value @ Market Prices 3.Value of Domestic Product + N.F.I.A = Value of National Product

Concepts of NI Gross Domestic Product GDP Gross National Product GNP Net National Product NNP Net Domestic Product NDP GDP / GNP at Factor Cost (FC) at Market Prices (MP) at Constant Prices (CP) NNP /NDP at FC, at MP and at CP Per Capita Income (PCI) , Disposable Income (DI)Personal Income (PI) and Finally what is NI ?

Measuring N.I w.r.f. to IndiaEconomic activities in India are divided into three sectors, namely ;Primary Sector : Agriculture, Apiculture, Floriculture,

Quarrying, Mining, Horticulture, Animal Husbandry, Dairying,

Livestock , Agri-business related.

Secondary Sector : All Manufacturing industries also known as Manufacturing SectorTertiary Sector /: Banking, Insurance, Postal, Telecom, Services Sector IT & ITES, Professional activities etc.

What methods are applied in India? • In India output method is applied for the

Primary and Secondary Sectors and

•Income method is applied for the Services Sector.• • Expenditure method cannot be applied for a

heavy populated country like India.