# Computation of national income. 3 Important Methods for Measuring National Income 2019-01-31

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## The base year for computation of National Income i

Similarly, the regional distribution of income is revealed. All these are taken as final goods. Thus the definition advanced by Pigou has a limited scope. Capital gains are excluded from national income because these do not arise from current economic activities. Goods and services having money value are included in the national income but there are goods and services which may have no corresponding flow of money payments. For example, if production units use their own savings for production, then the interest is payable to them in the form of imputed interest.

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## How is national income calculated in India?

The term National Income represents Civil Services, 2001 a Gross National Product at market prices minus depreciation b Gross National Product at market prices minus depreciation plus net factor income from abroad c Gross National Product at market prices minus depreciation and indirect taxes plus subsidies d Gross National Product at market prices minus net factor income from abroad 18. Second, according to this definition when only such commodities as can be exchanged for money are included in estimation of national income, the national income cannot be correctly measured. Then the gross national income is Rs. In many cases, these people do not disclose their real income as they want to evade certain taxes, like personal tax etc. However the terms are used loosely. On the other hand, if they are used as intermediate goods, meant for further production, they would not be included in national income.

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## Difficulties in calculation of national income

It is also possible to measure the value of the total output or income originating within the specified geographical boundary of a country known as domestic territory. It includes payments made to all resources in the form of wages, interest, rent and profits. Each factor gives its contribution and gets consideration. But the net national income earned from abroad may be positive or negative. The total value added equals the value of gross domestic product of the economy. Including the imputed value of factor services rendered by the owners of production units themselves.

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## National Income of India

But there is one exception. The value obtained is the gross domestic product. Income received by basic factors like labor, capital, land and entrepreneurship are summed up. Types of Goods and Services : The kinds of goods and services which should be included in national income pose a problem. Without these, planning is not possible. These gains are called capital gains.

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## Error During Fetching Data

If it figures under both the categories, aggregate national income will be unduly inflated. If production units use their own savings, then the interest is payable to them in the form of imputed interest. Internationally some countries are wealthy, some countries are not wealthy and some countries are in-between. If saving exceeds investment, the national income will a Fall b Rise c Fluctuate d Remain constant 9. For instance, raw materials, semi-finished products, fuels and services, etc. So, to avoid duplication, the value of intermediate products used in manufacturing final products must be subtracted from the value of total output of each industry in the economy. Out of the value of total output of each sector is deducted the value of its intermediate purchases or primary inputs to arrive at the value added for the entire economy.

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## Top 6 Difficulties Faced in Computation of National Income

Thus, the total output of the farmer, baker, and grocer would be Rs. Thus it is difficult to determine the income of individuals who may be engaged in more than one occupation and it is difficult to decide the occupation to which he belongs. On the other hand, in case of agriculture,which constitutes large part of income but , For large numbers of agricultural producers do not keep accounts, nor are they taxed for income obtained from agriculture. It differs from personal income by the amount of direct taxes paid by individuals. First is by paying income tax, called corporate profit tax. This is the retail price and will count as consumption. National income can be defined by taking three viewpoints, namely production viewpoint, income viewpoint, and expenditure viewpoint.

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## Income Method of Calculating National Income (Part

It provides law and order, regulations. In common parlance, national income means the total value of goods and services produced annually in a country. On the graph, a straight diagonal line represents perfect equality of wealth distribution; the Lorenz curve lies beneath it, showing the reality of wealth distribution. But the value of money is not stable, as it changes from time to time, due to which the estimates of national income are affected and consequently, it is not possible to have an accurate picture of the national income. Wages, proprietor's incomes, and corporate profits are the major subdivisions of income. One view is that if police, military, legal and administrative services protect the lives, property and liberty of the people, they are treated as final goods and hence form part of national income.

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## Error During Fetching Data

The first scientific method was made by Prof. Methods of Computing National Income There are three methods for computation of National Income viz. Some of the reasons for the same are lack of uniformity in taxes, goods not being printed with their prices, etc. In the Keynes model above, which is independent? Thus the value of total output of the entire economy as per Table 1, is Rs. If each time, this wheat or its flour is taken into consideration, it will work out to Rs. This is because national income is calculated in terms of money, at market price.

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