CONCEPTS OF NATIONAL INCOME:
India is a mixed economy country. In a mixed economy, public sector (government-owned) business enterprises exist along with the private sector to achieve a socialistic pattern of society, in a welfare state. Ever since independence, India’s economic development has been guided by the two objectives (a) A rapidly and technologically progressive economy by democratic means, and (b) A social order based on justice, offering equal opportunity to every citizen of the country. National Income is the sum of domestic output and net income earned from abroad. It provide a wide view of the country’s entire economy, as well as the various groups in the population who participate as producers and income receivers. It measures the productive power of of an economy in a given period to convert commodities and National Wealth into goods and services for final consumption. The various concepts of National Income are as follows:
(A) Gross National Product (GNP): It is the money value of the total output produced or production of final goods and services by the nationals of a country during a given period of time.
(B) Gross Domestic Product (GDP): It is the money value of the total output produced or production of final goods and services within the boundaries of a nation by the nationals of the country during a given period of time.
(c) Net Domestic Product (NDP): It is an annual measure of the economic output of a nation that is adjusted to account for depreciation, calculated by subtracting depreciation from the gross domestic product (GDP). So, NDP = GDP – (depreciation on capital goods). NDP accounts for capital that has been consumed over the year in the form of housing, vehicle or machinery deterioration. The depreciation accounted for is often referred to as capital consumption allowance and represents the amount of capital that would be needed to replace those depreciated assets.
(D) Net National Product (NNP): It is the value obtained by subtracting the depreciation value from the Gross National Product of a country. Thus, NNP = (GNP - Depreciation). It can be calculated in two ways: (1) At the market prices of goods and services and (2) At factor cost.
(E) Per Capita Income: It is a measure of the amount of money that is being earned per person in a certain area. It can apply to the average per person income for a city, region or country and is used as a means of evaluating the living conditions and quality of life in different areas. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or GNI) and dividing it by the total population.
(f) Personal Income: It is that income which is actually obtained by the nationals of a country. Thus, Personal Income = National Income - (Undistributed profits
of a corporation) - (payment of the social security provisions) + (government transfer payments) + (business transfer payments) + (net interest paid by the government).
(g) Disposable Personal Income: It is obtained by subtracting personal direct taxes from the personal income of the national of a country. National Income can be calculated by Two methods (1) GNP Method and (2) NNP Method.
The GNP can be obtained by adding the income earned and received by the nationals of a country outside the boundaries of its country to the GDP, and subtracting the income received by foreign nationals from within the country. So, GNP = GDP + (income earned by nationals outside the country) - (income received by foreigners within the country).
The NNP is obtained at the factor cost. National Income is calculated by subtracting the net indirect tax from the NNP at market prices. Therefore, NNP at factor cost, or National Income = NNP at market prices - (indirect tax) + (subsidy) (Indirect Taxes - Subsidy) = Net Indirect Taxes.
The Gross National Income (GNI) of the country is estimated 133.01 lakh crore during 2019–20 year.
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