This presentation reveals about National Income, How to calculate National Income and Difficulties in the calculation of National Income

1. Dr.K.VASANTHI
ASSISTANT PROFESSOR
PG&RESEARCH DEPT OF ECONOMICS
GOVT.ARTS COLLEGE, COIMBATORE

2. The National Income statistics is one of
the important indicators of economic
development and trends in the economy.
By studying these data, we can get an
idea about the achievements of the
economy, the standard of life of people,
income per head available and the extent
of economic growth. The study of
national income is of vital importance in
planning.

3. According to the National Income
Committee (1951), “A national
income estimate measures the
volume of commodities and
services turned out during a
given period, counted without
duplication”

4. When national income is divided by
the population of the country we get
the per capita income of the country
in a given year.
Per capita income shows what is
available per head and not what is
distributed

5.  Product Method
 Income Method
 Expenditure Method

6.  In this case, the total value of all the
goods and services produced in a
country, is calculated during the
financial year

7. In this case, incomes and payments
received by all the people in the
country are calculated

8.  Expenditure of not only individuals, but
also of business houses, and
Government should be taken for the
calculation of National Income through
the expenditure method

9. Conceptual Difficulties
In calculating the value of goods and
services the difficulty arises whether
services should be included and if so
what kind of services should be
included.

10. As the barter system is very extensive
in our villages, a good portion of the
output in agriculture is likely to be
ignored in the computation of
national income

11. In India, the serious handicap is the
non-availability of vital statistics and
inadequacy of data. This is more so
in agricultural and small enterprises
sector. Most of the producers and
small entrepreneurs are illiterate and
ignorant without maintaining
accounts or having any idea of
accounting.

12. In the product census method, the error
double counting may creep in while
calculating raw materials first and then
the finished products and services.
There are greater possibilities of double
counting in the rural sector due to the
absence of well defined economic
institutions and functions.

13. The transfer problem is another
difficulty arising in the calculation of
National Income. In the computation
through income method, only net
income has to be taken and not gross
income. So, care should be taken to
calculate this transfer amount

14. The National Sample Survey, the
Central Statistical Organization, the
Reserve Bank of India, tee State
Statistical Bureau and many official
and semi official organisations try to
device ways and means to
standardize the procedure in
arriving at the reliable information.