National income

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National income

  1. 1. NATIONAL INCOME MADE BY:ASHUTOSH
  2. 2. MESURING NATIONAL INCOME METHODS VALUE ADDED INCOME EXPENDITURE
  3. 3. MEANING OF NATIONAL INCOME <ul><li>FROM INCOME POINT OF VIEW </li></ul><ul><li>“National income is the sum of factor incomes earned by normal residents of a country within and outside the country in the form of rent, wages, interest and profit in an accounting year.” </li></ul><ul><li>(factor incomes for factors of production) </li></ul>
  4. 4. CONCEPT <ul><li>DEPRICIATION : Dep. is used to differentiate between GROSS and NET. </li></ul><ul><li>(GROSS = NET + DEPRICIATION) </li></ul><ul><li>NET INDIRECT TAX : NIT is used to differentiate between MARKET PRICE and FACTOR PRICE. </li></ul><ul><li>(MKT. PRICE = FAC. PRICE + NIT) </li></ul>
  5. 5. Cont…… <ul><li>NET FACTOR INCOME FROM ABROAD : NIFA is used to differentiate between NATIONAL INCOME and DOMESTIC INCOME. </li></ul><ul><li>(NATIONAL = DOMESTIC + NIFA) </li></ul>
  6. 6. EXAMPLES <ul><li>1. GDP to GNP : </li></ul><ul><li>GNP = GDP + NIFA </li></ul><ul><li>2. GDP at MP to GNP at FC : </li></ul><ul><li>GNP at FC = GDP +NIFA – NIT </li></ul><ul><li>3. GDP to NDP : </li></ul><ul><li>GDP = NDP + DEPRICIATION </li></ul>
  7. 7. Domestic income and its Components COMPONENTS Compensation of employees Operating surplus Mixed income of Self employed
  8. 8. COMPENSATION OF EMPLOYEES <ul><li>WAGES :This is a reward or compensation paid to employees for rendering services. It includes : </li></ul><ul><li>1.Wages and salaries in cash or kind. </li></ul><ul><li>2.Empolyer’s contribution to SSC schemes. </li></ul>
  9. 9. OPERATING SURPLUS <ul><li>OPERATING SURPLUS </li></ul>Income from property Income from Entrepreneurship
  10. 10. Parts of Income from Property <ul><li>There are two parts :- </li></ul><ul><li>1. Rent </li></ul><ul><li>2. Interest </li></ul>
  11. 11. Parts of Income from Entrepreneurship <ul><li>PROFIT </li></ul>Corporate tax Dividend Undistributed profit
  12. 12. Mixed Income of Self-Employed <ul><li>Income of own account workers (like farmers , doctors ,barbers) and unincorporated enterprise (like small shopkeepers , retail traders etc.). </li></ul><ul><li>They do not make proper accounts . </li></ul><ul><li>They do not hire factor services from market rather they have their own. </li></ul><ul><li>In India they are known as unorganized sectors so, their income is clubbed under mixed income head. </li></ul>
  13. 13. Steps Involved <ul><li>Identify enterprises which employ factors of production. </li></ul><ul><li>Classify various types of factor income under three main heads. </li></ul><ul><li>Estimate amount of factor payments made by each enterprise. </li></ul><ul><li>Sum up all factor payments made within domestic territory to get NDP at FC . </li></ul><ul><li>Estimate NIFA to derive NATIONAL INCOM </li></ul>
  14. 14. Precautions <ul><li>All transfer incomes are not included. </li></ul><ul><li>Sale and purchase of second hand goods are excluded because they are not part of production of this year’s. </li></ul><ul><li>Imputed rent of owner is included (assumed). </li></ul><ul><li>Incomes from illegal activities like betting, smuggling ,black marketing are excluded. </li></ul>

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