NATIONAL INCOME & ESTIMATION MODELS

Sam Chacko Vadavana

MACFAST College, Tiruvalla

WHAT IS NATIONAL INCOME?National income is the final outcome of

all economic activities of a nation valued in terms of money.

The sum total of the values of all goods and services produced in a year.

It is the money value of the flow of goods and services available in an economy in a year.

Cont….

National Income Committee of India (1951) defines National Income as follows:

“ A national income estimate measures the volume of commodities and services turned out during a given period counted without duplication.”

 Thus, National income is the aggregation of wages, rent, interest and profit or is the total of rewards to be given to the factors of production for any certain period.

CONCEPTS OF NATIONAL INCOMEGross Domestic Product- GDPGross National Product- GNPNet National Product-NNPPersonal Income- PIDisposable Personal Income-DPIPer Capita Income-PCI

Gross Domestic Product - GDPGross domestic product (GDP) is a measure

of the income and expenditures of an economy.

It is the total market value of all final goods and services produced within a country in a given period of time.

It includes both tangible goods (food, clothing, cars) and intangible services (haircuts, housecleaning, doctor visits).

Gross National Product - GNP

Gross national product (GNP) is the total income earned by a nation’s permanent residents (called nationals).

It differs from GDP by including income that our citizens earn abroad and excluding income that foreigners earn here.

GNP=GDP+X-M

Net National Product - NNP

Net National Product (NNP) is the total income of the nation’s residents (GNP) minus losses from depreciation.

NNP=GNP-Depreciation

Personal Income - PI Income earned by all the individuals and

institutions during a year in a country. The entire national income does not reach individuals and institutions. A part of it goes by way of corporate taxes .

 PI = National Income –(Corporate taxes, undistributed profits, social security contributions) + Transfer Payments.

Disposable Personal Income - DPI Disposable personal income is the income that

household and non corporate businesses have left after satisfying all their obligations to the government.

Disposable personal income = Personal Income - Direct Taxes

Per capita Income - PCI If the national income is divided by the total

population we get the per capita income.

National Income = C + I + G + (X – M)

where C = Consumption, I = Investment, G = Government and X is Export and M is Import.