Home Banking Awareness What is national income and why is it calculated?

What is national income and why is it calculated?

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What is national income

National income means of information about the economic performance of any country’s economy.

After independence, the Government of India formed the National Income Committee on 4 August 1949, to estimate the national income, headed by PC Mahalanobis

What Is National Income?

The total monetary value of final goods and services produced in a given year is called national income, “National income includes the market prices of goods and services”.

National income data provides information about total production growth rate, national income structure, per capita national income, savings and investment and etc.

It is considered to measure national income in India from April 1 to March 31.

The national income in India was first estimated by Dada Bhai Naoroji in 1868, he calculated the national income in his book “Poverty and Un-British Rule in India”.

Scientific calculation of national income in India is credited to Prof. B. K. RV Rao, who used a combination of production calculation system and income calculation system for estimating national income.

His estimate is considered to be the most reliable. National Income Assessment presented in his book “National Income in British India”

Presently, the National Income Organization in India is estimated by the Central Statistical Organization, it was established on 2 May 1951, and its headquarters are located in New Delhi.

The annual statement of the Central Statistical Organization (C.S.O.) is called National Accounting Statistics, also known as a white paper.

The Central Statistical Organization (C.S.O.) has divided the Indian economy into three parts (primary, secondary and tertiary) and 14 sub-sectors for estimating national income.

Primary Sector

  • Agriculture
  • Forestry
  • Fisheries
  • Mines

Secondary sector 

  • Manufacturing
  • Construction
  • Electricity
  • Gas
  • Water supply

Tertiary sector 

  • Transportation
  • Communication
  • Trade
  • Banking and insurance etc.

How National Income Measure?

Three methods are available to measure national income.

  • Production calculation method
  • Income calculation method
  • Consumption saving method

Production calculation method

Under this, the value of the final goods and services produced in a year in a country is determined.

Income calculation method

Under this, income from various sectors of the economy is used.

Consumption saving method

According to this, total consumption and total savings are estimated for calculating national income, the total sum of these two is called national income.

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