There are 3 methods of measuring national income: 1) Value added method or product method which measures domestic income by estimating the contribution of each producing enterprise in the domestic territory. 2) Income method 3) Expenditure method The value added method involves classifying production units, estimating the gross value added of each unit as the difference between output value and intermediate consumption, and measuring output value as sales plus change in stock. National income is then calculated by adjusting GDP for net factor income from abroad, depreciation, and net indirect taxes.

1. By : Dhirendra Chauhan
National
IncomePart-2

2. “Methods of Measuring “
National Income

3. There are 3 Methods of measuring
National Income
1. Value added method or product method
2. Income method
3. Expenditure method

4. Value added method
“Value added method is the method which measures
domestic income by estimating the contribution of
each producing enterprise in the domestic territory of
the country in an accounting year”

5. Inter Relationship of Different Concepts
Gross
Product
MP
Net
FC
National
-
NFIA
FC
+
NIT
MP
-
NIT
Domestic
+
NFIA
Net
+
dep.
Gross
-
dep.

6. Step
“value added method involves the following
steps”
1. Classification of Production Units
Identify all the production units in the domestic
economy and classify them into three sectors such as
primary , secondary and tertiary

7. 2. Estimation of Gross Value Added (GVA)
by Each Producing Enterprise
 Value added
Value added is the addition is the difference
between value of firms output and the value of
intermediate consumption
 Value added by each production unit is know as
Gross Value Added at Market Price (GVAMP)
GVAMP = Value of Output - Intermediate Consumption

8. Value of Output
Value of output refers to market value of
commodities produced by a firm during a period
of one year.
Value of Output = P x Q
P = Price per unit
Q = Quantity

9. 3. Measurement of Value of Output
Value of output = Sales
OR
Value of Output = Sales + Change in Stock(ΔS)
Δstock = Closing stock – Opening stock

10. “Sales”
Domestic Sales + Export
And
“Intermediate Consumption “
Purchases of raw material form domestic market + Imports

11. Intermediate Consumption
• Value of non- factor inputs( land , labour,
capital, entrepreneurship) used in the
production is termed as intermediate
consumption
• Generally it includes raw material, fuel,
power etc.

12. Estimation of National Income
Net factor income from abroad(NFIA) is
added, depreciation and net indirect taxes are
subtracted to GDPMP to arrive at NNPFC or
Nation Income
Nation Income = GDPMP – D + NFIA – NIT
(NNPFC)

13. THANK
YOU