National income means the income of a country or total output of the economy during one year.

It can be defined as Total market value of all final goods and services produced during a year by an economy.

The total net value of all goods and services produced within a nation over a specified period of time, representing the sum of wages, profits, rents, interest, and pension payments to residents of the nation.

National income estimates measures the volume of commodities and services turned out during a given period without duplication.

Level of Economic Welfare The national income estimate reveals the overall performance of the country during a given financial year. With the help of this statistics the per capita income i.e. the income earned by every individual is calculated. It is obtained by dividing the total national income by the total population. With this we come to the level of economic welfare in terms of its standard of living. .

Rate of Economic Growth With the help of national income statistics we can know weather the economy is growing or declining. In simple words it helps us to know the conditions of a country economy. If the national income is growing over a period of year it means that the economy is growing and if the national income has reduced as compares to the previous it reveals that the economy is detraining. Similarly the growing per capita income shows an increasing standard o living of the people which is a positive sign of a nations growth and vice versa.

Distribution of Wealth One of the most important objectives that is achieved after calculating national income is to check its distribution among different categories of income such as wages, profits, rents and interest. It helps to understand that how well the income is distributed among the various factors of the economy and their distribution among the people as well.

. Easy in Planning Since the national income estimates also contain the figures of saving, consumption and investment in the economy so it proves to be a valuable guide to economic policy relating to planning and active government intervention in the economy. The estimates are used as a data for future planning also.

Formation of Budget Budget is an effective tool for planning and control. It is prepared in the light of the information regarding consumption, saving, and investment which are all provided by the national income estimates. Further we can asses and evaluate the achievements or otherwise of the development targets laid down in the plans from the changes in national income and its various components

It indicates the prosperity of a nation It indicates the trends of inflation and deflation. It helps to know the progress of various sectors in the economy, Imbalanced growth if any can be solved. It indicates the economic status of the country Among the nations of the world.

Gross National product: National income is the sum total of values of all goods and services pro duced during a year. The money value of this total output is known as GNP.

Net national Product: This refers to the net production of goods and services in a country during a year We get NNP by deducting depreciation from GNP NNP = GNP Depreciation

Net national Product: This refers to the net production of goods and services in a country during a year We get NNP by deducting depreciation from GNP NNP = GNP Depreciation

Personal Income PI:Income earned by all the individuals and institutions during a year in a country. The entire NI does not reach inviduals and institutions A part of it goes by way of corporate taxes Undistributed profits Social security contributions

PI =National Income-(Corporate taxes, Undistributed profits, social security contributions) + Transfer payments.

Disposable Income (DI)

The income left after the payment of direct taxes from personal income is called Disposable Income. Disposable income means actual income which can be spent on consumption by individuals and families. Thus, it can be expressed as:
DI=PI-Direct Taxes From consumption approach, DI=Consumption Expenditure+Savings.

Per Capita Income (PCI) Per Capita Income of a country is derived by dividing the national income of the country by the total population of a country. Thus, PCI=Total National Income/Total National Population .

Gross National Product: The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. .

GDP

G
where:

NX

"C" is equal to all private consumption, or consumer spending, in a nation's economy "G" is the sum of government spending "I" is the sum of all the country's businesses spending on capital "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)
.

. . .Net National Product (NNP) at Factor Cost (National Income): NNP at factor cost or National Income is the sum of wages, rent, interest and profits paid to factors for their contribution to the production of goods and services in a year. It may be noted that: NNP at Factor Cost = NNP at Market Price Indirect Taxes + Subsidies.

. National income at current price. When the value of goods and services is found out by multiplying quantity produced in one year by the prices prevailing in that year ,we call it national income at current prices.

. National income at constant price. When the value of goods and services is calculated by multiplying quantity produced in one year with the prices of the base year, we call it national income at Constant prices.

i) Non-availability of statistical material: Some persons like electricians, plumbers, etc., do some job in their spare time and receive income. The state finds it very difficult to know the exact amount received from such services. This income which, should have been added to the national income is not recorded due to {be lack of full information of statistics material. (ii) The danger of double counting: While computing the national income, there is always the danger of double or multiple counting. If care is not taken in estimating the income, the cost of the commodity is likely to be counted twice or thrice and national income will be overestimated. .

. (iii) Non-marketed services: In estimating the national income, only those services are included for which the payment is made. The unpaid services, or non-marketed services are excluded from the national income..

. (vii) Self-consumed production: In developing countries, a significant part of the output is not exchanged for money in the market. It is either consumed directly by producers or bartered for other goods This unorganized and non-monetized sector makes calculation of national income difficult

. V) Difficulty in assessing the depreciation allowance: The deduction of depreciation allowances, accidental damages, repair, and replacement charges from the national income is not an easy task. It' requires high degree of judgment to assess the depreciation allowance and other charges.

. VI)Value of Inventories Since it is not easy to calculate the value of raw materials, semi finished and finished goods in the custody of producers there fore it creates problems.

. . VII)Income from Foreign Firms One of the major problem relates to the fact that weather the income arising from the activities of the foreign firms operating in a country should be included in the countries national income or not .With the growing trend of doing business globally has increased this problem to a great extant. However the I.M.F has given the viewpoint that the production and income of these foreign forms should go to the owning country while there profit must be credited to the parent concern

. VIII)Transfer Payments Individual get pension, unemployment allowance and interest on public loans, but these payments creates difficulty in the measurement of national income. These earnings are a part of individual income and they are also a part of government expenditures.

. IX)Petty Production There are large numbers of petty producers and it is difficult to include their production in national income because they do not maintain any account. .

XI)Treatment of the Government Government expenditures: 1. Defiance and administration expenditure. 2. Social welfare expenditure. 3. Payment of interest on national debts 4. Miscellaneous development expenditure. The real problem that is faced relates to which of the above should be included in the national income.