Limitations of National Income Estimation in India

This section emphasises on the limitations of national income estimation in India. The measurement of national income is beset with difficulties. In under developed countries, these difficulties are more prominent. The difficulties in calculation of national income can be discussed as follows:

1. Conceptual Difficulties: There has been a change of opinion concerning the term ‘nation’ in the idea of national income. It has to describe exactly, whether it is physical entity of the country or the nationals together with those residing abroad. Since national income establishes a quantitative measure of economic activity rather than verbal description. Since the whole thing has to be associated to the money value, services produced in economy for love of humanity, affection and philosophy could not be taken into attention in calculating national income.

2. Overlapping of Occupations: In backward economies, there is a coinciding of profession in rural sector which marks it problematic to know the income by source. A worker in a peak season works in a farm, efforts a country cart in off season. Takes up unskilled work, etc. likewise, the village money lender associations his occupation with the humanizing of his farm.

3. Difficulty in Value Estimation: In backward areas, the cultivators, artisans and cottage industry workers do not have a fair idea of the expenditures of their job. Hence, the net value of their products cannot be appraised precisely.

4. Non-monetised Sector: Barter industry and non-monetized sector generates the problem of recording the value of their food and services and by guess work and approximation.

5. Incomplete Government Records: Due to unawareness and illiteracy in backward areas, the data may not be obtainable and if obtainable, may be untrustworthy. Also, the facts furnished by government bureaucrats may not be from dependable sources and data is not current.

6. Problems in Agricultural Sector: In agricultural activities, there is a good deal of guess work in data relating to crop wise production and in facts associating to animals and forest products.

7. Problems in Industrial Sector: Data concerning output, cost, etc. are accessible only in big units. The small units do not preserve these facts appropriately. The village money lenders and indigenous bankers preserve absolute secret of their and they do not furnish correct information.

8. Non-applicability of a Uniform Formula: In a big country where extensive differences and district variations, an unchanging method cannot be applied. The data of one region cannot be realistic to another region with minor alteration. Every region would be a separate entity requiring particular method suited only to that region.

9. Double-counting: The mistake of double-counting is additional obstacle to be avoided in the calculation of national income.

10. Inefficient Data Collection: The machinery for gathering statistical data may not be well-organized. The investigators, preparation of adhoc figures, making sample surveys, etc.

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