Unit I: National Income Accounting-Concepts & Measurement
Unit I: National Income Accounting-Concepts & Measurement
Unit I: National Income Accounting-Concepts & Measurement
• National income is an uncertain term and is often used interchangeably with the national
dividend, national output, and national expenditure.
• National Income is based on the fact that one man’s expenditure is another man’s income. So
it is represented as a triple identity i.e.,
• 6. Income from Productive Activity: It only includes value of goods and services produced
during that year. E.g., income from second hand sales is ignored.
• 7. Financial Year: - National Income always relates to a time period usually a year. In India,
the national income is estimated by Central Statistical Organization annually for a financial
year beginning from 1st April and ending on 31st March.
• 8. Realized Value: National is the value of final goods and services which have been actually
produced. So it is a realized concept.
SOME BASIC CONCEPTS
• Domestic Territory- Also called Economic Territory refers to the geographical territory
administered by a government within which persons, goods and capital circulate freely. It
includes ships, aircrafts operated by normal residents, fishing vessels & floating platforms
operated by residents of a country on international waters and embassies, military
establishments of a country located abroad.
• Normal Residents- refers to an individual or institution who ordinarily resides in the country
and whose economic interest lies in that country.
• Factor Income- refers to income received by the factors of production for rendering factor
services in the production process. E.g., rent, wages etc.
• Transfer Income- refers to income received without rendering any productive service in return.
E.g., Old age pension, pocket money etc.
• The concept of Domestic Territory helps to estimate ‘Domestic Product’ which
includes production activity of production units located in the economic territory
irrespective of the fact whether carried out by the residents or non-residents.
• Intermediate goods are those goods which are used either for resale or for further production
in the same year. For e.g., sugar purchased by shop owner for stocking in his shop, sugar
used in making sweets.
• Intermediate goods have derived demand and Final goods have autonomous demand.
• NET INDIRECT TAXES- It refers to the difference between indirect taxes
and subsidies. Indirect taxes are tax imposed by the Government on
goods & services. Subsidies refer to economic/financial assistance given
By the government to the business sector or households for general
welfare. They help in calculating FC & MP concepts.
• DEPRECIATION- It refers to a fall in the value of fixed assets due to
normal wear and tear, passage of time or obsolescence. It is also
known as capital consumption or replacement cost. They help in calculating
Gross and Net concepts.
• NET FACTOR INCOME ABROAD (NFIA)- It refers to the difference
between factor income received from the rest of the world and the
factor income paid abroad. It helps in computing Domestic and
National Income
CONCEPTS
GDPMP
PDI GDPFC
PI NDPMP
N
NNPFC
I NDPFC
NNPMP GNPMP
GNPFC
DOMESTIC CONCEPTS
• GDPMP -refers to gross market value of • NDPMP -refers to net market value of all final
all final goods and services produced goods and services produced within the
within the domestic territory of a country domestic territory of a country during a
period of one year.
during a period of one year.
• NDPMP = GDPMP - Depreciation
• GDPFC -refers to gross money value of
all final goods and services produced
within the domestic territory of a country • NDPFC -refers to net money value of all final
during a period of one year. goods and services produced within the
domestic territory of a country during a
• GDPFC = GDPMP - NIT period of one year.
• GNPFC-it is the sum of the money value of the • NNPFC-it is the sum of the money value of the
income accruing to the various factors of income accruing to the various factors of
production in one year in a country. production in one year in a country.
PI = NI + income received but not earned - income earned but not received
• Personal Disposable Income is that part of income which is finally available to individuals for disposal.
This is arrived by deducting personal taxes from the Personal Income.
• Disposable personal income represents what people have that they can spend. Personal Disposable
Income is either consumed or saved.
• PDI = C + S
NUMERICALS
• Calculate NDPFC
Particulars Rs. In Crores
GNPMP 8,000
Depreciation 600
• Calculate GDPMP
Particulars Rs. In Crores
NNPFC 2,000
Depreciation 200
Subsidies 70