Calculating National Income

You must understand that there are several methods for calculating the national income for instance, income method, production method, expenditure method, etc.

Production Method: The production method provides us national income or national product based on the final value of the produce and the source of the produce in terms of the industry. All producing units are categorised sector wise.

·      Primary sector is divided into agriculture, fisheries and animal husbandry.

·      Secondary sector consists of manufacturing.

·      Tertiary sector is divided into trade, transport, communication, banking, insurance etc.

Income Method: Different factors of production are paid for their productive services supplied to an organisation. The several incomes that are included in these methods are income of self-employed, interest, profit, wages, dividend, rents and surplus of public sector and net flow of income from abroad.

Expenditure Method: The several sectors – the household sector, the business sector, the government sector, either spend their income on consumer goods and services or they save a part of their income. These can be categorised as private consumption expenditure, public investment public consumption, private investment, etc.

Calculation of National Income of India: A Brief History

It will be fascinating for you to know that the first effort to calculate National Income of India was made by Dadabhai Naroji in 1867-68. This was followed by various other techniques. The first scientific technique was formulated by Prof. V.K.R Rao in 1931-32. However, this was not very satisfactory. The first official effort was made by Prof. P. C. Mahalnobis in 1948-49, who presented his report in 1954.

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