National income is the total value of final goods and services produced in a country in one year. After independence, India established the National Income Committee to compile estimates. National income includes contributions from the primary, secondary, and tertiary sectors. It is measured using methods like expenditure, output, and income, which take factors like GDP, GNP, NDP, and NNP into account. National income plays a vital role in measuring a country's economic development.

1. NATIONAL INCOME
By Juili Salvi
M.A. ECONOMICS

2. INTRODUCTION
 National income is the total value of a country’s
final output of all new goods and services produced
in one year.
 After independence, the government of India
appointed the national income committee in
august 1949, under the chairmanship of prof. p.c.
mahalanobies, to compile authoritative estimates of
national income.
 National income estimates are related with the
financial year(April 1 to 31st March).
 At present estimation of national income is based
on the base year of 2004-2005.

3.  National income includes the contribution of three
sectors :- primary sector, secondary sector, tertiary
sector.
 Under primary sector :- Agriculture, forest, fisheries
and allied sector are included.
 Under secondary sector :- manufacturing,
construction, electricity, gas and water supply are
included.
 Under tertiary sector :- trade, transport,
communication, banking, insurance, real estate,
community and personal services are included.

4. CONCEPT OF NATIONAL INCOME

5. GROSS DOMESTIC PRODUCT
 GDP is the sum of money value of all final goods and
services produced within the domestic territories of a
country during an accounting year.
 GDP= C + I + G (X-M)
 GDP at market price :- includes the final value of goods
and services also includes indirect taxes and excludes
the subsidies given by the government.
 GDP at factor cost :- is the money value of final goods
and services based on the cost involved in the process
of production.
 GDP at factor cost= GDP at market price - indirect taxes
+ subsidies

6. GROSS NATIONAL PRODUCT
o GNP is the aggregate final output of citizens and
business of an economy in a year.
o GNP may be defined as the sum of gross domestic
product and net factor income from abroad (NFIA)
o GNP= GDP + NFTA
o GNP= C + I + G + (X-M) + NFIA
o NFIA :- difference between income received from
abroad for rendering factor services and income
paid towards services rendered by foreign nationals
in the domestic territory of a country.

7. NET DOMESTIC PRODUCT AND NET NATIONAL
PRODUCT
 Net domestic product = GDP- depreciation
 Net national product = GDP- depreciation + NFIA
 0r GNP- depreciation
 Thus NNP is the actual addition to a year’s wealth and is
the sum of consumption expenditure, govt expenditure,
net foreign expenditure and investment less
depreciation, plus net income earned from abroad=
C+I+G+(X-M)-depreciation +NFIA
 NNP at factor cost is the sun total of income earned by
all the people of the national boundaries or abroad.
 It is also called national income
 NNP at factor cost= NNP at market price – indirect taxes
+ subsidies

8. PER CAPITA INCOME AND PERSONAL INCOME
 Per capita income is the average income of the people
of a country in a particular year.
 Per capita income= national income/ total population
 Personal income is the total income received by the
individuals of a country from all sources before direct
taxes in one year.
 Personal income = national income- undistributed
corporate profits- corporate taxes – social security
contributes + transfer payment
 Personal disposable income is the income which can be
spent on consumption by individual and families.
 Personal disposable income = personal income –
personal taxes

9. METHODS TO MEASURE NATIONAL INCOME
 For measuring national income in India, in 1868, the first attempt
was made by dada bhai nauroji. He in his book “poverty and Un-
British rule in India” estimated income per capita annual income
at a level of rs. 20
 There are three methods of measuring national income as
follows :-
 Expenditure method ( measuring the amount purchased):- while using
expenditure method, the distinction should be drawn between
intermediate goods and final foods. Goods which are used
directly to satisfy economic wants of the people are referred as
final goods. On the other hand goods which are used to
produced these final goods or other goods are referred as
intermediate goods.
 Expenditure method measures economic activity by summing up
the value of expenditure on final goods. Expenditure on
intermediate goods are excluded here to avoid double counting,
as this expenditure is already considered into final expenditure.

10.  Out put method (measuring the amount produced) :- this
method is also called as value added method as this
method measures economic activity by summing up the
value added by all firms.
 The difference between the price at which the
commodity is sold and the cost of intermediate goods
used to produce that commodity is referred to value
added by the process of production of that commodity.
 Income method (measuring the amount earned) :- income
method takes into account all the factors of production
to estimate the value of economic activities ( national
income) in the economy.

11. CONCLUSION
 National income of India is influenced by its
concepts viz.GDP, GNP, NDP and NNP.
 Indian economy is growing faster because of faster
growth of its national income.
 Thus all the above factors play a very vital role in
development of any economy.