Methods of Calculating National Income in India

Introduction

The economy of country refers to labor and property supplied by the people of the nation. The national income of a country is expressed in terms of money valued at current price levels.

A national income provides a total for the country’s whole economy, and permits one to weigh the magnitude of any given sector, the product, expenditure or income of any group, against the corresponding national totals.

The three methods of estimating the national income in a country like India are (a.) the income method, (b.) the production method and (c.) the consumption method & saving method. They are briefly discussed below:

Methods

A. The Income Method

The income method is based on the statistics of income tax. In calculating national income according to this method, we shall have to take into account the total amount of rent, wages, interest and profit. Under this method, taxes and transfer payments will be excluded from the purview of the national income,

B. The production method

In this method, accurate estimates of production and wages are necessary. Here, we are to take into account the market value of all goods and services produced in a year in a country, i.e., production of agricultural commodities, principal industries as well as milk products and forests and mines. However, the balance of payments must be deducted from or added to the national income,

C. The consumption and saving method

Under the method, it is possible to find out the total income of country if we know the value of consumption and saving in a year. Besides, national income may also be calculated by a combination of income and production methods.

Conclusion

For, national income statistics enable an overall view to be taken of the whole economy and of the relative positions and inter­relations and its various parts. The calculation of national income determines the economic progress of a country. It is a useful instrument of economic planning. Moreover, in an underdeveloped country like India, one can judge the standard of living of the people through the estimates of national income.

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