These financial terms are used in order to determine the earnings of a country. However, GDP does not include services and products that are produced by the nation in other countries. GDP measures the overall economic output of a country and also determines the local income of a nation.
The Conventional series revealed national income data both at current prices and at prices covering the period from to Here the contribution of all the 13 sectors was added for obtaining an estimate of the net domestic product at factor cost through the application of both net output method and net income method.
To arrive at the estimate of net national income, the net income from abroad and net indirect taxes were added to the estimate of net domestic product at factor cost. Moreover, for obtaining a series of national income at constant prices, this estimate was deflated at the prices of base year chosen.
The revised series revealed national income data National income gdp exercise both at current prices and at prices for the period to Later on, a new series was also started with as base year.
Due to this difference in the base year and differences in weights used for the two series, estimates of national income revealed differences in its magnitudes. These national income estimates have also been projected backwards to prepare a total series of national income from onwards for the sake of comparison.
Taking this new series into consideration, the estimates of national income aggregates have registered an increase in the new series as against series. Again the CSO prepared another new National income gdp exercise on national income with as base year as against the existing series with as base year.
Although the total national income has registered an increase in this new series but the estimates of gross domestic, savings have been revised downwards. Methodology of National Income Estimation in India: In India, the estimation of national income is being done by two methods, i. While estimating the gross domestic product of the country, the contribution to GDP from various sectors like agriculture, livestock, fishery, forestry and logging, mining and quarrying is estimated with the adoption of product method.
In this method, it is important to estimate the gross value of product, bi-products and ancillary activities and then steps are taken to deduct the value of inputs, raw materials and services from such gross value.
In respect of other sub-sectors like animal husbandry, fishery, forestry, mining and factory establishments, the gross value of their output is obtained by multiplying the estimated output with their market price.
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.
In respect of secondary activities, the computation of gross domestic product is done by the production approach only for the manufacturing industrial units both registered and unregistered.
In respect of constructions activity, the estimates of the value of pucca construction is made by the commodity flow approach and that of the kachcha construction is made by the expenditure method.
In India, the income from rest of the sectors, i. Here, the income approach is adopted to estimate the value added from these aforesaid remaining sectors. Here, the process involves the measurement of aggregate factor incomes in the shape of compensation of employees wages and salaries and operating surpluses in the form of rent, interest, profits and dividends.
In order to measure the contribution of small enterprises, it is essential to make an estimation of total number of workers employed in different occupations under small enterprises through sample surveys and also to estimate the per capita average earnings of such workers.
After multiplying the total number of such workers employed by their average earning, the contribution of small enterprises to national product is estimated.
In order to derive the contributions of transport and communication, trade and commerce, professions and liberal arts, the same procedure as adopted by the small enterprises is followed.
Regarding the contribution of the public sector, the amounts related to wages, salaries, pensions, other benefits, dividend or surpluses etc.
Again the contribution of house property to the national income is obtained by estimating the imputed value of net rental of all houses situated both in urban and rural areas.
Finally, by adding up the contribution of all different sectors to national income of the country, it is necessary to obtain net domestic product at factor cost. In order to derive the net national income at current prices, it is necessary to add the net income from abroad and net indirect taxes with the net domestic product at factor cost.
This same estimate is then deflated at the prices of the base year selected to derive a series of national income at constant prices. Trends in National Income in India: A study, of the trend of the national income in India over the last 60 years, in detail, is very much essential for attaining a clear understanding about the impact of planning on the Indian economy.
Both the national income and per capita income are first collected at current prices and then at constant prices for eliminating the effect of any change of price level during that period. This trend in national income also reflects on the standard of living of the people of India.
Thus the national income at current prices is influenced by both the increase in production of goods and services and the rise in prices. In order to make the national income figures comparable, these figures are deflated at constant prices just for eliminating the effect of any change in the price level of the country.
Practice Questions: National Income Accounting. Basics. 1. Suppose an economy’s expenditures are equal to $7, billion. Income in the economy is: a. Suppose the Gross Domestic Product in a country is $ million and the population of that country is $ million. What is the per-capita GDP of that country? a. Rental income is the R and is $ Interest income is i and is $ PR are business profits and are $ Therefore: NI = $67 + $75 + $ + $ NI = $ GDP = NI + Indirect Business Taxes + Depreciation GDP = $ + $74 + $36 GDP = $ As you can see, in this case, both approaches to calculating GDP will give the same estimate. DEFINITION OF NATIONAL INCOME The flow of goods and services by a nation over a period of time, usually a year. Exercise Items RM (Millions) Private Investment 15, NATIONAL INCOME ACCOUNTING GROSS DOMESTIC PRODUCT (GDP).
It is observed that NNP of India at 05 prices increased from Rscrore in to Rs 2, crore in and then to Rs 4, crore in P registering a growth rate of per cent during the last 64 years. Again the national income NNP of India at current prices increased from Rs 9, crore in to Rs 2, crore in and then to Rs 9, crore in P registering a growth of nearly times during the last 64 years.
Again the per capita income figure at constant prices increased from 7, in to Rs 24, in and then to Rs 39, in P registering a growth rate of per cent during the last 64 years.
Moreover, the per capita income at current prices also increased from Rs in 51 to Rs 24, in and then to Rs 74, in registering growth of times during the last 64 years.National income in many countries are either in Gross Domestic Product (GDP) or Gross National Product (GNP).
Gross Domestic product (GDP) refers to the total value of goods and services produced within the geographical boundary of a country before the deduction of capital consumption.
ECONOMICS MACROECONOMICS (For TTH Classes Only) EXERCISE 1: THE GROSS DOMESTIC PRODUCT 1.) In a simple economy suppose that all income is either compensation of employees or profits.
Costello is certainly right to say per capita income (gross national income divided by the number of Australians) was much lower in the Menzies era than it is now.
Difference between GDP and National Income Tweet Key Difference: GDP is used to calculate all the products or services that are produced within a country’s boundaries and is a small part of the National income.
GDP – The Income Approach GNP – depreciation = Net National Product NNP – indirect business taxes = Natl. Income National Income – corporate profits + dividends – SS contributions + govt. transfers to individuals – net interest + Exercise: Compute the CPI The basket contains 20 pizzas and 10 compact discs.
prices: pizza CDs. The manual benefited from inputs provided by national accounts compilers and practitioners in national Exercise on GDP by the production and final expenditure approaches vi GDP by the income approach from the production side