# Calculation of national income in india. National Income of India 2022-10-08

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National income is a measure of the total output of goods and services produced in a country over a given period of time, usually a year. It is an important indicator of the economic performance and well-being of a country and is used to compare the economic growth and development of different countries.

In India, the national income is calculated by the Central Statistical Organization (CSO), which is a government agency responsible for collecting, compiling, and disseminating statistical data on the Indian economy. The CSO uses three different methods to calculate the national income of India: the product method, the income method, and the expenditure method.

The product method involves adding up the value of all the goods and services produced in the country during a given period. This includes both the final goods and services that are consumed by households, as well as intermediate goods and services that are used as inputs in the production of other goods and services. The value of the goods and services is measured in terms of their market prices, which are used to estimate the total value of output.

The income method involves adding up the incomes earned by all the factors of production in the country, including wages and salaries earned by workers, rent earned by land owners, interest earned by capital owners, and profits earned by entrepreneurs. This method measures the income generated by the production of goods and services in the economy.

The expenditure method involves adding up the total expenditure on all the goods and services produced in the country. This includes both domestic expenditure, such as household consumption and government expenditure, as well as foreign expenditure, such as exports.

All three methods should theoretically give the same value for the national income, but in practice, there are discrepancies due to various factors such as measurement errors and the difficulty of valuing certain types of goods and services, such as informal sector activity and household production. To account for these discrepancies, the CSO uses a combination of the three methods to arrive at the official estimate of the national income of India.

In addition to the official estimate of the national income, the CSO also publishes alternative measures of national income, such as the gross national product (GNP) and the gross domestic product (GDP). The GNP measures the income generated by the production of goods and services in the country, regardless of where the factors of production are located. The GDP, on the other hand, measures the value of all goods and services produced within the country, regardless of whether they are produced by domestic or foreign factors of production.

In conclusion, the national income of India is a crucial indicator of the economic performance and well-being of the country. It is calculated using three different methods, namely the product method, the income method, and the expenditure method, and is published by the Central Statistical Organization. Alternative measures of national income, such as the GNP and the GDP, are also published.

## Measurement of National Income

It is also useful in determining the country's progress. Investment spending applies to fixed capital investment, such as plants and equipment, offices, etc. It is the net amount of income of the citizens by production in a year. Estimating the final expenditures on goods and services by industrial sectors. To calculate GNP, we use two methods: the expenditure approach, which adds up all of the purchases citizens made in the previous year, and the income approach, which adds up all of the earnings citizens received in the previous year.

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## National Income Estimates in India

Spending on government consumption, gross capital government and private , and net exports Export-Import. This will give NDPfc. But these estimates were having no scientific basis of its own. The production method In this method, accurate estimates of production and wages are necessary. From such gross value of output, deductions are made for cost of materials used and depreciation charges so as to obtain net value added in each sector. India includes the following items: agriculture and allied services; mining; development, construction, the supply of electricity, gas, and water, transport, communication, and trade; banking and industrial real estate and property ownership of residential and commercial services and public administration and defence and other services or government services. Generally, production units borrow for making investment and households borrow for meeting consumption expenditure.

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## Methods of Measuring National Income

Besides, national income may also be calculated by a combination of income and production methods. In its first report, the total national income of the year 1948-49 was estimated at Rs. For large numbers of agricultural producers do not keep accounts, nor are they taxed for income obtained from agriculture. Parameters National income at Current price National income at Constant price Causes of change National income at current price is affected by both price and quantity changes. Estimates : During the post-independence period, the estimate of national income was primarily conducted by the National Income Committee.

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## Methods for Calculation of National Income

The sum-total is the GDP at market prices since the money value is measured at market prices. Hence the output method can be usefully employed for estimating the output of any sector of the economy. The investigators, preparation of adhoc figures, making sample surveys, etc. The letter I denote the investments. Traditionally, there are four factors of production, namely land, labor, capital, and organization.

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## Measurements of National Income

Since the net value added is allocated as revenue to the owners of production factors, the sum of domestic factor incomes and fixed capital consumption is GDP or depreciation. Thus GDP by expenditure method at market prices is net export, which can be positive or negative. Most of the time, it is based on assumptions. Step 1 — The first component that must be identified and computed is consumption, which is nothing more than the total expenditure incurred by the country's government in the procurement of goods and services. Taking the sum of NVAfc of all the industrial sectors of the economy.

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## National Income Formula

UPSC Mains Answer Writing Practice. On the other hand, if GDP is measured in a given year based on fixed costs, it is referred to as GDP at constant prices, or actual GDP. ADVERTISEMENTS: Again the C. ADVERTISEMENTS: There are then National Sample Surveys supplying data on specific subjects. Thus, GDP at Factor Cost is equal to the sum of Net value added and Depreciation.

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## Methods of Calculating National Income in India

Non-monetised Sector: Barter industry and non-monetized sector generates the problem of recording the value of their food and services and by guess work and approximation. Problems in Industrial Sector: Data concerning output, cost, etc. Step 3 — Total investments made within the country must also be calculated. There are three different ways to calculate GDP that should all add up to the same amount: The national output is equal to national expenditure Aggregate demand which in turn is equal to national income. For example, a farmer produces 5 kilograms of wheat worth Rs. Method: In the combination of a mixed method, both the output method and the income method have been used.

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## Measuring National Income in India: Present Method

Questions on National Income What is the usefulness of estimating the National Income? Likewise, all manufactured components, such as raw materials used in the manufacture of products for sale, are also exempt. ADVERTISEMENTS: Let us discuss the different methods of measuring national income as shown in Figure-1. Their earnings are classified as mixed-income. Step 8 — Now add all of the values from steps 1 to 4, deduct the values computed in steps 5 and 6, and finally add the value obtained in step 7. The best thing for a country then is to have estimates based on all these methods. The only distinction is that for commodity methods, the NI is estimated at the level of manufacturing or production, with the NI method being measured at the level of delivery, and with the NI expenditure method being measured at the level of disposal.

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## National Income

In national income accounting, interest is restricted to the payment by production units. Accordingly there are four factor payments, namely rent, compensation of employees, interest, and profit. The value of output can be calculated by multiplying quantity of output produced by a production unit during a given time period with price per unit. The combination of these two methods is thus the natural consequence of the present economic situation of the country. These steps are as follows: 1. Labor, capital, land, and entrepreneurship are the four main components of production.

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## Indian Economy

Aspirants should begin their preparation by solving now!! This is because these goods are already counted when sold for the first time. This is the true net annual income or revenue of the country or national dividend. Excluding the expenditure incurred on pre-owned goods Table-1 shows the summarize calculation of national income by three methods: Welcome to EconomicsDiscussion. Thus, imports are the part of HFCE. The most severe one is the finding of reliable data. And in the third method, it is the expenditure on these goods and services which is estimated. First is by paying income tax, called corporate profit tax.

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