1. NATIONAL INCOME

2. NATIONAL INCOME
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“National income is the aggregate money value of
all final goods and services produced in an
economy in an accounting year”
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The growth rate of an economy is measured
primarily by the rate at which the real national
income is growing.

3. GROSS NATIONAL PRODUCT (GNP)
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The GNP is defined as the value of all goods and
services produced during a specific period,usually
one year,plus incomes earned abroad by the
nationals.
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GNP = GDP + Net Factor Income From Abroad

4. NET FACTOR INCOME FROM ABROAD
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It is the difference between factor incomes such as
wages, rent,interest and profits received from
abroad by the normal residents of India for
rendering services in another country minus(-) such
factor incomes earned by nonresidents for
rendering services in the domestic territory during a
given period.

5. GROSS DOMESTIC PRODUCT (GDP)

The GDP is defined as the market value of all final
goods and services produced in the domestic
economy during a period of one year,plus income
earned locally by the foreigners minus income
earned abroad by the nationals.
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GDP= GNP – Net Factor Income From Abroad

6. NET NATIONAL PRODUCT (NNP)
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NNP is the money value of all currently produced
final goods and services by the nationally owned
resources,obtained by excluding depreciation from
the value of GNP
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NNP = GNP - Depreciation

7. MEASUREMENT OF NATIONAL INCOME
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National Income aggregates can be measured in 3
different ways:
Production or Value added method
Income Method
Expenditure Method

8. PRODUCTION METHOD
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According to this approach , National Income aggregates are
measured as the sum of values added from various
production sectors in a given period. It involves the following
steps.
a)Classifying the production units into 3 sectors
1.Primary sector: The primary sector produces goods and
services by the direct exploitation of natural resources. It
includes agriculture,fishing,forestry,logging,quarring,etc
2.Secondary sector:it consist of all activities that transforms one
commodity into another through an industrial process. This
sector includes manufacturing, construction works, electricity
generation,gas and water supply, etc
3.Tertiary sector : it consists of all activities producing nontangible products called services. This sector incluudes
transport & communication, trade, banking, insurance,,etc

9. PRODUCTION METHOD (CONTD..)
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b) Estimating the value of Net domestic product at
factor cost :for this purpose,the net value added at
factor cost in each producing unit is calculated
first, then the total value of these in each sector is
calculated. Finally, net domestic product at factor
cfost is obtained by adding up the net value added at
factor costs in the 3 producing sectors .
c) Estimating Net factor income from abroad:it is the
difference between factor income earned by normal
residents from abroad and factor income earned by
non resident from the domestic territory.
d) Estimating national income
NI = Net domestic product at factor cost + Net factor
income from abroad

10. INCOME METHOD
Under this method, national income is obtained by
summing up the incomes of all individuals of the
country. This method involves:
 a) Classifying the producing units as
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1. Primary Sector
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2. Secondary Sector &
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3. Tertiary Sector
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11. INCOME METHOD (CONTD..)
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b) Classifying factor income :
Compensation to employees: wages, salaries
Operating surplus: rent , intrest, profit
Mixed income of the self employed: factor incomes earned by people for
rendering factor services
c) Estimating the value of Domestic Factor Income:
Factor income paid out by each production unit is measured.
Factor income generated by each sector is calculated
The value of domestic factor income is estimated as,
Factor income generated in the primary sector + Factor income generated in
the secondary sector + Factor income generated in the tertiary sector
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d) Estimating the net factor income from abroad
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e) Estimating national income
NI = DFI + NFI from abroad

12. EXPENDITURE METHOD
Under this method, national income is measured as the sum of all final
expenditure.
 The sum of final expenditure given us the value of GDP at market prices.
GDPm = C + I + G + (X-M)
This method involves the following steps:
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a)Estimating the values of the components of final
expenditure
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C = Consumption Expenditure:It refers to the expenditure on the
purchase of goods and services by households and nonprofit institutions
during a given period.This includes the purchase of durable goods, non
durable goods and services.
I = Investment expenditure:it refers to the expenditure on the purchase
of capital goods during a given period.
G = Gov.t purchases of goods and services
X-M = Net exports
The sum of these values gives the GDPm.

13. EXPENDITURE METHOD (CONTD..)
b) Adding the net factor income from abroad to
the value of GDPm
GDPm + Net factor income from abroad = GNPm
c)Deducting the values of depreciation and Net
indirect taxes from the value of GNPm
GNPm –(Depreciation + Net indirect taxes) = NNPf
NNPf = National Income
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