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National Income of India

According to the National Income Committee (1949), “A national income estimate measures the volume of commodities and services turned out during a given period counted without duplication”.

Thus, national income measures the net value of goods and services produced in a country during a year and it also includes net earned foreign income. In other words, a total of national income measures the flow of goods and services in an economy.

National income is a flow not a stock. As contrasted with national wealth, which measures the stock of commodities held by the nationals of a country at a point of time, national income measures the productive power of an economy in a given period to turn out goods and services for final consumption.

In India, National income estimates are related with the financial year ( April 1 to March 31 ).

Concepts of National Income India

The various concepts of national income are as follows :

1. Gross National Product Formula ( GNP ) : Gross National Product refers to the money value of total output or production of final goods and services produced by the nationals of a country during a given period of time, generally a year.

As we include all final goods and services produced by nationals of a country during a year in the calculation of GNP, we include the money value of goods and services produced by nationals outside the country.

Hence, income produced and received by nationals of a country within the boundaries of foreign countries should be added in Gross Domestic Product ( GDP ) of the country. Similarly, income received by foreign nationals within the boundary of the country should be excluded from GDE.

In Gross National Product Equation Form :

GNP = GDP + X – M,

where,

X = Income earned and received by nationals within the boundaries of foreign countries
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M = Income received by foreign nationals from within the country.

If X = M, then GNP = GDP.

Similarly, in a closed economy X = M = 0, then also GNP = GDP.

Gross Domestic Product ( GDP ) is the total money value of all final goods and services produced within the geographical boundaries of the country during a given period of time.

As a conclusion, it must be understood while domestic product emphasizes the total output which is raised within the geographical boundaries of the country; national product focuses attention not only on the domestic product, but also on goods and services produced outside the boundaries of a nation. Besides, any part of GDP which is produced by nationals of a country, should be included in GNP.

2. Net National Product Formula ( NNP ) : NNP is obtained by subtracting depreciation value ( i.e., capital stock consumption ) from GNP.

In Net National Product Equation Form :

NNP = GNP – Depreciation.

3. National Income : GNP, explained above, is based on market prices of produced goods which includes indirect taxes and subsidies.

NNP can be calculated in two ways :

  1. at market prices of goods and services.
  2. at factor cost.

When NNP is obtained at factor cost, it is known as National Income. National Income is calculated by subtracting net indirect taxes ( i.e., total indirect tax-subsidy ) from NNP at market prices. The obtained value is known as NNP at factor cost or National income.

In NNP Equation Form :

NNP at factor cost or National Income = NNP at Market price – ( Indirect Taxes – Subsidy ) = NNPMP – Indirect Tax + Subsidy.

  • Personal Income : Personal income is that income which is actually obtained by nationals. Personal income is obtained by subtracting corporate taxes and payments made for social securities provisions from national income and adding to it government transfer payments, business transfer payments and net interest paid by the government.

In Personal Income Equation Form :

Personal Income = National income – undistributed profits of Corporations – payments for social security provisions – corporate taxes + government transfer payments + Business transfer payments + Net interest paid by government.

  • It should always be kept in mind that personal income is a flow concept.
  • Disposable Personal Income : When personal direct taxes are subtracted from personal income the obtained value is called disposable personal income ( DPI ).

In Disposable Personal Income Equation Form :

[Disposal Personal Income] = [Personal Income] – [Direct Taxes].

Methods of Measuring National Income

According to Simon Kuznets, national income of a country is calculated by following mentioned three methods :

1. Product Method : S. Kuznets gave a new name to this method, i.e., product service method. In this method, net value of final goods and services produced in a country during a year is obtained, which 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.

2. Income Method : In this method, a total of net incomes earned by working people in different sectors and commercial enterprises are obtained. Incomes of both categories of people – paying taxes and not paying taxes are added to obtain national income.

For adopting this method, sometimes a group of people from various income groups is selected and on the basis of their income national income of the country is estimated. In a broad sense, by income method national income is obtained by adding receipts as total rent, total wages, total interest and total profit.

Symbolically : National Income = Total Rent + Total Wages + Total Interest + Total Profit.

3. Consumption Method : It is also called expenditure method. Income is either spent on consumption or saved. Hence, national income is the addition of total consumption and total savings. For using this method, we need data related to income and savings of the consumers.

Generally reliable data of saving and consumption are not easily available. Therefore, expenditure method is generally not used for estimating national income.

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

Estimates of National Income in India

No specific attempts were made for estimating national income in India during pre-independence era. In 1868, the first attempt was made by Dadabhai Naoroji.

He, in his book ‘Poverty and Un-British Rule in India’, estimated Indian per capita annual income at a level of Rupee 20. Some other economists followed it and gave various estimates of Indian national income. Some of these estimates are as follows :

8Bareilly [ UP ]148, Civil Linesbareilly, Uttar Pradesh, Statebareilly 243001, Uttar Pradesh.0581 - 2420127 / 135 / 113UP
9Bhopal [ MP ]Plot No. 165A & 166, Star Arcadem P Nagar, Zone Bhopal 462 011, Madhya Pradesh0755 - 4085010 / 12MP
10Bhubaneshwar [ OR ]Archbishops, Housesatyanagar, Bhubaneshwar - 751 007, Orissa0674 - 2571834 / 735OR
11Bittan Market, Bhopal [MP]E - 5 , \"Star Plaza\", 1st Floor, Plot No. 6, Bittan market.Arera Colony Bhopal – 462 016, Madhya Pradesh0755 - 4062200 - 4062212MP
12Bokaro [ JH ]Hotel Blue Diamond, 15 D / 1 Western Avenueground Floor, Bokaro Steel Citybokaro 827 001, Jharkhand06542 - 226123, 42, 44JH
13Boring Road, Patna [ BH ]Udaiman Apartmentboring Road, Patnapatna - 800 001, Bihar0612 - 2573341 / 2 / 3BH
14Chandigarh [CH]SCO 343 - 344, Sector 35B, Chandigarh - 160 022, Chandigarh0172 - 4601401 / 02 / 03CH
15Chowk, Allahabad [ UP ]59 Shiv Charan Lal Road, Chowk, Allahabad - 211 003, Uttar Pradesh0532 - 2563907 / 8 / 9UP
16Coimbatore [ TN ]Vigneshwar Cresta, No. 1095 Avinashi Road, Pappanaickan Palayam, Coimbatore 641 037, Tamil Nadu0422 - 6517863 / 64 / 65TN
17Cuttack [ OR ]Jayashree Plaza, Badambadi, Cuttack - 753 009, Orissa0671 - 2335601 / 3 / 6OR
18Dadar, Mumbai [ MH ]Broadway Premises Co - op Society Ltd., Drbabasaheb Ambedkar Road, Dadar tt, Dadar ( East ) Mumbai - 400 014, Maharashtra.022 - 24171479 / 80 / 81MH
19Daryaganj, Delhi [ DL ]18, Netaji Subhash Marg, Darya Ganj, New Delhi - 110 002, Delhi.011 - 51563489 / 90 / 91DL
20Dehradun [ UT ]74 ( New No. 250 / 466 ), Rajpur Road, Dehradun - 248 001, Uttarakhand0135 - 2740919 / 920UT
21Dhanbad [ JH ]Shri Ram Plaza, 1st Floor, Bank Moredhanbad - 826 001, Jharkhand0326 - 2300667 / 669JH
22Gajuwaka, Vishakapatnam [ AP ]Padmasree Arcade, NH - 5, Chinagantyada Main Road Visakhapatnam - 530 026, Andhra Pradesh.0891 - 2766421 / 2745036AP
23Gandhinagar [GJ]Gandhinagar Milk Consumerco - Op. Union Ltplot No 436, Sector 16, Gandhinagar - 382 016, Gujarat.079 - 23243274 / 5580GJ
24Ghatkopar ( E ), Mumbai [ MH ]Sai Heritage, Tilak Roadnear Balaji Mandir, Ghatkopar ( East ), Mumbai - 400 077, Maharashtra022 - 61712626MH
25Ghaziabad [ UP ]Plot No 3, N - 30, Ambedkar Road, Nehrunagar Ghaziabad ( U.P. ), Ghaziabad 201 001, Uttar Pradesh.0120 - 2757115 / 120UP
26Golpark, Kolkata [ WB ]20, Gariahat Road Golpark Kolkata - 700 019, West Bengal.033 - 4409987 / 9990WB
27Guntur [ AP ]1st Floor, PR Raju Plaza, 11 - 1 - 1 Naaz Centreguntur 522 001, Andhra Pradesh0863 - 217979 / 89AP
28Guwahati [ AS ]Chibber House GS Road, Dispur, Guwahati - 781 005 Assam.0361 - 2340522 / 2340561AS
29Gwalior [ MP ]Kanwal Complex, Shrmant Madhav Raoscindia Marggwalior - 474 002, Madhya Pradesh.0751 - 2233770, 80, 90MP
30Hauz Khas, New Delhi [ DL ]National Institute of Fashion Technology ( NIFT ), NIFT Campus, New Delhi - 110 016, Delhi011 - 26531503 / 2653480DL
31Hissar [ HR ]SCO No. 177 Commercial Urbal Estate No. 1 Hissar - 125 001, Haryana01662 - 227442 / 5 / 8 / 56HR
32Indiranagar, Bangalore [ KT ]276, Hal II Stage, 100 Ft Road Indira Nagar Bangalore - 560 038, Karnataka.080 - 25202057 / 58KT
33Indore [ MP ]Kamal Palace, 1 Yeshwant Colony Yeshwant Niwas Road Indore - 452 003 Madhya Pradesh.0731 - 4295201 / 333MP

Soon after independence, the Government of India appointed the National Income Committee in Aug 1949 under the chairmanship of Prof. PC Mahalanobis, to compile authoritative estimates of national income. The committee submitted its first report in 1951 and the final report 1954.

According to this report, the total national income of the country was estimated at a level of Rupee 8,650 crore and per capita income at a level of Rupee 246.90. The final report appeared in 1954 gave estimates of national income during the period 1950 – 1954. For further estimation of national income, the government established Central Statistical Organization ( CSO ) which now regularly publishes income national data.

Recently CSO has introduced a new series on National Income with 1999 – 2000 as base year. National income includes the contribution of three sectors of the economy primary Sector ( Agriculture, Forest, Fisheries, Mining ), Secondary Sector ( Industries – Manufacturing and Construction ) and Tertiary Sector ( Trade, Transport, Communications, Banking, Insurance, Real Estate, Community and Personal Services ).

CSO and NSSO to be Merged

The government is planning to merge Central Statistical Organization ( CSO ) and National Sample Survey Organization ( NSSO ) for promoting statistical network in the country. The newly merged unit will be named as National Statistical Organization ( NSO ). The head of the organization will be designated as ‘Chief of Statistician of India’ and will be having the rank of Chief.

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