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National IncomeThe study of National Income isimportant because of the followingreasons:       To see the economic develop...
Expenditure Method:The various sectors – the household sector, the government sector, the business sector, eitherspend the...
activities. It means the share of each individual when the income from the productiveactivities is divided equally among t...
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National income nd per capita income


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National income nd per capita income

  1. 1. National IncomeThe study of National Income isimportant because of the followingreasons: To see the economic development of the country. To assess the developmental objectives. To know the contribution of the various sectors to National Income.Internationally some countries are wealthy, some countries are not wealthy and somecountries are in-between. Under such circumstances, it would be difficult to evaluate theperformance of an economy. Performance of an economy is directly proportionate to theamount of goods and services produced in an economy. Measuring national income is alsoimportant to chalk out the future course of the economy. It also broadly indicates people’sstandard of living.Income can be measured by Gross National Product (GNP), Gross Domestic Product (GDP),Gross National Income (GNI), Net National Product (NNP) and Net National Income (NNI).In India the Central Statistical Organization has been formulating national income.However some economists have felt that GNP has a measure of national income haslimitation, since they exclude poverty, literacy, public health, gender equity and othermeasures of human prosperity.Instead they formulated other measures of welfare like Human Development Index (HDI)Calculating National IncomeThere are various methods for calculating the national income such as production method,income method, expenditure method etc.Production MethodThe production method gives us national income or national product based on the final valueof the produce and the origin of the produce in terms of the industry.All producing units are classified sector wise. Primary sector is divided into agriculture, fisheries, animal husbandry. Secondary sector consists of manufacturing. Tertiary sector is divided into trade, transport, communication, banking, insurance etc.Income Method:Different factors of production are paid for their productive services rendered to anorganization. The various incomes that includes in these methods are wages, income of selfemployed, interest, profit, dividend, rents, and surplus of public sector and net flow ofincome from abroad.
  2. 2. Expenditure Method:The various sectors – the household sector, the government sector, the business sector, eitherspend their income on consumer goods and services or they save a part of their income.These can be categorized as private consumption expenditure, private investment, publicconsumption, public investment etc.Calculation of National Income of India: A Brief HistoryThe first attempt to calculate National Income of India was made by DadabhaiNaroji in 1867-68. This was followed by several other methods. The first scientific method was made byProf. V.K.R Rao in 1931-32. But this was not very satisfactory. The first official attempt wasmade by Prof.P.C.Mahalnobis in 1948-49, who submitted his report in 1954.Difficulties in Calculation of National IncomeIn India there are various difficulties in calculating the national incomes .The most severe oneis the finding of reliable data. Most of the time, it is based on assumptions. Soon afterindependence the National Income Committee was formed to collect data and estimateNational Income. The two major problems which remain in the calculation of NationalIncome are: Most of the data is not from the current year. Even if current data are available then values are underreported.Obstacles in High Growth of National Income of IndiaEven if the Indian economy grows faster than the BRIC countries and G 6, the benefits of thegrowth would not be evenly distributed. India’s progress in education cannot be termed assatisfactory. In terms of higher education it has achieved tremendous success, but itsunsatisfactory performance in primary education and secondary education has been a majorobstacle to growth. Similarly India’s healthcare system is in a less than desirable state.Governments’ spending on public health has not been up to the required levels.Growth Of National Income In India Sector 1950-1980 1980-2005 GDP Total 3.5 5.6 GDP Per capita 1.4 3.6Sectoral Composition Of National Income (in percent) Year Primary Secondary Tertiary Total GDP 1950-51 59 13 28 100 1980-81 42 22 36 100 2002-03 24 24 52 100Per Capita IncomeMeaning and SignificancePer capita Income means how much anindividual earns, of the yearly income that is generated in the country through productive
  3. 3. activities. It means the share of each individual when the income from the productiveactivities is divided equally among the citizens. Per capita income is reported in units ofcurrency. Per capita income reflects the gross national product of a country. Per capitaincome is also a measure of the wealth of a population of a nation when compared with othercountries. It is expressed in terms of commonly used international currency such as Euro,Dollars because these currencies are widely known.Per Capita Income In IndiaIndias per capita income is found by the Atlas method and by employing official exchangerates for conversion. Further, this Atlas method of calculating the per capita income of Indiais not determined by using purchasing power parity, which essentially adjusts exchange ratesfor purchasing power of currencies.Economist have been giving considerable importance to the performance of states vis a viseach other in terms of per capita income. It has been observed that those states that were moreopen and better adapted to economic liberalization have overall shown faster rate of growth.Per Capita Income of Various Indian StatesThe two backward states of the Indian republic Jharkhand and Orissa are growing at a rapidrate in terms of the per capita income because of rise of industrial activities in these twostates. Karnataka is at the top of the chart with the fastest growing per capita income (nearly9.28%) followed by Gujarat with 8.92%.The per capita income in 17 states is below thenational average of 8.4%. Per capita income shows the purchasing power of the states and soit is very important for the states to increase the per capita income of each person.History of India Per Capita GDP In 2002-03 the Per Capita Income in India was Rs 19040. In2003-04 the Per Capita Income in India was Rs 20989. In2004-05 the Per Capita Income in India was Rs 23241. In2008-2009 the Per Capita Income in India was37490. GDP at factor cost at constant (1999-2000) prices in the year 2008-2009 is likely to attain a level of Rs 3351653.India achieved a growth rate of 7.1 per cent in 2008- 2009. Agriculture, forestry and fishing had a combined growth rate of 2.6 per cent during 2008-2009 Industry had growth rate of 3.4 per cent during 2008-2009 Service sector had a growth rate of 10.3 per cent during 2008-2009Inspite of the global meltdown, India has performed well in comparison to the rest of theworld