National income basic concepts (based on 2018-2019 economic survey)

1. NATIONAL INCOME

2. Your Company
Spring Style 20XX
National income is the money value of all
the final goods and services produced by a
country during a period of one year.

3. Definition
According to Marshall:
“The labour and capital of a country acting on its natural
resources produce annually a certain net aggregate of
commodities, material and immaterial including services of all
kinds. This is the true net annual income or revenue of the
country or national dividend.”

4. From the modern point of view,
Simon Kuznets has defined national income as “the net
output of commodities and services flowing during the year
from the country’s productive system in the hands of the
ultimate consumers.”

5. Basic concepts in NI
1. Gross Domestic Product (GDP)
2. Gross National Product (GNP)
3. Net Domestic Product (NDP)
4. Net National Product (NNP)

6. Gross Domestic Product (GDP)
● The total market value of all final goods and services produced
within the domestic boundary of a territory in a specified
period.
● 2 types of GDP;
1. Nominal GDP (GDP at current price)
2. Real GDP (GDP at constant price)
● GDP per capita = total GDP/ total population

9. ● Factor cost/ factory price/ cost price - is the input cost the producer
has to incur in the process of producing something.
● Market cost/ selling price - is derived after adding the indirect taxes
to the factor cost of the product i.e., the cost at which the goods reach
the market.
● Depreciation - is the consumption of fixed capital, or it is the fall in
value of fixed capital due to wear and tear.

10. Gross National Product (GNP)
● The total market value of all final goods and services produced by the
citizens in an economy in a specified period.
● GNP = GDP + Net factor income from abroad
● Net factor income abroad = factor income received by indian
nationals from abroad - factor income paid to foreign nationals
working in india
● GNP > GDP

11. Net Domestic Product (NDP)
● NDP is the value of net output of the economy during the year.
● Some of the country’s capital equipment wears out or becomes
obsolete each year during the production process. The value of this
capital consumption is some percentage of gross investment which is
deducted from GDP.
● Net Domestic Product = GDP at Factor Cost – Depreciation.

12. Net National Product (NNP) at Market price
● NNP includes the value of total output of consumption goods and
investment goods. But the process of production uses up a certain
amount of fixed capital.
● In order to arrive at NNP, we deduct depreciation from GNP.
● The word ‘net’ refers to the exclusion of that part of total output
which represents depreciation.
NNP = GNP- Depreciation.

13. NNP at factor cost or National Income
● NNP at factor cost or National income is the sum of wages, rent,
interest and profit paid to factors for their contribution to the
production of goods and services in a year.
● NNP at factor cost = NNP at market price - indirect taxes + subsidies

14. Per Capita Income (PCI)
● Per Capita Income of a country is derived by dividing the national
income of the country by the total population of a country.
● Per capita income = income per head per year
= NNP/ total population (Avg income
of nation)

16. Personal Income (PI)
● Personal Income is the total money income received by individuals
and households of a country from all possible sources before direct
taxes.
● PI = National Income - Social security contribution - corporate
income tax- undistributed profit + transfer payment

17. Real Income:
Real income is national income expressed in terms of a general level of prices of a
particular year taken as base. National income is the value of goods and services produced
as expressed in terms of money at current prices.
Disposable Income:
Disposable income or personal disposable income means the actual income which can
be spent on consumption by individuals and families. In order to obtain disposable
income, direct taxes are deducted from personal income.
Disposable Income = Personal Income – Direct Taxes.

18. Domestic Income:
Income generated (or earned) by factors of production within the country from its own
resources is called domestic income or domestic product.
Domestic Income = National Income - Net income earned from abroad.
Private Income:
Private income is income obtained by private individuals from any source, productive
or otherwise, and the retained income of corporations.
Private Income = National Income (or NNP at Factor Cost) + Transfer Payments +
Interest on Public Debt — Social Security — Profits and Surpluses of Public
Undertakings.

19. GDP
NNPNDP
GNP
+ Net factor income abroad
-Depreciation -NIT
GDP (FC)
-Depreciation -NIT
GNP (FC)
NDP (FC) NNP (FC)
-Depreciation -Depreciation-NIT
-NIT
Market Price

20. Global comparison of top 10 economies

22. DRISYA K
ROLL NO 27