17-01-2013, 04:21 PM
National Income
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INTRODUCTION
The sum total of the values of all goods and services produced in a year
It is the money value of the flow of goods and services available in an economy in a year
National Income Committee of India 1951 defines National Income as follows:
“ A national income estimate measures the volume of commodities and services turned out during a given period counted without duplication.”
It refers to the money value of the flow of goods and services available annually in an economy.
Marshall’s Definition:
“The labour and capital resources of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds…. This is the true net annual income or revenue of the country or the national dividend.”
Double counting
If steel has been evaluated in industrial production, it should not be included while calculating the value of steel products, viz, machines and motor cars.
To avoid double counting or multiple counting, two methods are used
Final products method
Value added method
National Income concepts
The following are the concepts of national income
Gross National Product – GNP
Net National Product – NNP
Personal Income – PI
Per capita Income – PCI
Gross National Product
Gross National Product. GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. Basically, GNP measures the value of goods and services that the country's citizens produced regardless of their location.
Relation between national product and domestic product
The concept of domestic product is based on the production units located within economic territory,operated both by residents and non-residents. The concept of national product is based on residents, and includes their contribution to production both within and outside the economic territory.Normally, in practical estimates, domestic product is estimated first. National product is then derived from the domestic product by making certain adjustments.Let us see how?
National product is derived in the following way:
National product = Domestic product
+ residents contribution to production outside the economic
territory
- non-residents contribution to production inside the economic
territory
Importance of national income
It indicates the prosperity of a nation. Growth in national income indicates economic prosperity
It indicates the standard of living of people of a country
It indicates the per capita income with which we can compare the levels of development of all the countries
Countries can be classified as ‘developed’ and ‘developing’ and ‘under developed’ based on their per capita income only
Trends of national income of India
During the plan periods, national income and per capita income are increasing steadily
But the rise in the per capita income is rather slow due to population growth
Agricultural sector is the most important sector as it is the single largest contributor to the national income
In the recent years, the share of the government sector in national income is steadily increasing indicating the increased efficiency of the public sector