METHODS OF MEASURING NATIONAL INCOME[Economy]

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 METHODS OF MEASURING NATIONAL INCOME.




National Income of a country is calculated by following three methods :

Product Method

● In this method the net value of final goods and services produced in a country during a year is obtained and the total obtained value is called total final product. This represents Gross Domestic Product (GDP).

● Net income earned in foreign boundaries by nationals is added and depreciation is subtracted from GDP.


Consumption Method

● It is also called the expenditure method. Income is either spent on consumption or saved.Hence national income is the addition of total consumption and total savings.

[In India, a combination of production method and income method is used for estimating national income].

Income Method

● In this method, a total of net incomes earned by working people in different sectors and

commercial enterprises is obtained.

● National Income = total Rent + Total Wages + total Interest + Total Profit.

ESTIMATES OF NATIONAL INCOME IN INDIA


● In 1868, the first attempt was made by Dada Bhai Naoroji. He, in his book ‘Poverty and Un-British Rule in India’. estimated Indian per capita annual income at a level of Rs. 20.


● Some Other economists followed it and gave various estimates of Indian national income,

some of these estimates are as follows :

Findlay Shirras ( 1911) - Rs.49

Wadia & Joshi ( 1913-14) – Rs.44.30

Dr. V.K.R.V. Rao (1925-29) – Rs.76

● After independence, the Government of India appointed the National Income Committee

in August 1949 under the chairmanship of Prof. P.C. Mahalanobis, to compile

authoritative estimates of national income.

● The government established the Central Statistical Organization(CSO) in 1949 for

formulating National Income.





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