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GDP CONCEPTS
#1
National income is the sum total of output of commodities and services produced by the economy as a whole during a given period of time
generally one year counted without duplication. In India, National Income estimates are related with the financial year i.e., 15t April to 31st
March. National Income is used as a measure of economic growth.
National Income includes the contribution of three sectors of the economy namely:
a) Primary Sector: Agriculture, Forestry, Fishery,Mining.
b) Secondary Sector: Industries, manufacturing, construction, electricity, gas, water.
c) Tertiary Sector: Trade, Banking, Insurance, Transport and Communication, Real Estate etc. The National Income is compiled by Central
Statistical Organisation (CSO) and presently is based on 1993-94 as base year. CONCEPTS OF NATIONAL INCOME
A) Gross Domestic Product (GDP) :
GDP is the market value of the final goods & services produced within the domestic territory of a country during one year.
B) Gross National Product (GNP): GNP = GDP + Net factor Income from abroad (X—M).
Where X = Income earned due to exports and money value of goods and services produced by nationals outside the country;M = Income
paid due to Imports and Income received by foreign nationals from within the country.
If Export minus imports = 0, Then GNP = GDP
C) Net Domestic Product (NDP): NDP = GDP - Depreciation
D) Net National Product (NNP): NNP = GNP - Depreciation
E) National Income: NNP is computed at factor cost. Further when we use a term national income we imply NNP at factor cost.
F) NNP at Factor cost
= NNP atMarket Price—Indirect Taxes + Subsidies Or = NNP at Market Price - Net Indirect Taxes Where
Net Indirect taxes means (Indirect taxes - Subsidies)
Market Price is the economic price for which goods and services offered in the market.
G) Per Capital Income: It is ratio between national income of the country & population of that country Per Capita Income = National Income /
Population.
H) Green GDP : GDP which factors in cost of its environment degradation.
MEASUREMENT OF NATIONAL INCOME: There are three methods of measuring the national income
a) Product Method (Value Added Method) b) Income Method I Distribution Method
c) Expenditure Method (Consumption Method)
a) PRODUCTMETHOD: Under this method, national income is equal to net national product at factor cost. This method
used fe'r agriculture and animal husbandry, forestry & mining & quarrying, registered manufacturing. In this method, net value o final goods
and services produced in a country during a year is obtained and the total obtained value is called total final product This represents GDP.
Real GDP or GDP at constant Price: Real GDP is calculated by tracking the volume or quantity of production after removing the influence of
changing prices or inflation. It reflects the real growth. It is the value of today's output at yesterday price.
Nominal GDP or GDP at current Prices: represents the total money value of final goods and services produced in a giver year, where the values
are expressed in terms of the market prices of each year. Simply it is the value of today's output a today's price.
b) INCOME METHOD: This method measures national income from the side of payment made to the factor of production lik
land, labor, capital and entrepreneur. This method is used to calculate gas, electricity & water supply banking & insurance transport,
communication and storage, unregistered manufacturing, trade, hotel, restaurants, public administration and defence In broad sense, by
Income method, national income is obtained by adding receipts of total rent, total wages, total interest an total profit.
c) EXPENDITURE METHOD: This method measure national income from the angle of expenditure of whole community. Thi method is basically used for estimating income in construction activity. GDP = Consumption + Gross investment + Government spending + (Exports - Imports) and the formula is GDP = C+I+G + (X-M)
The first compilation of national income in India was prepared by Dadabhai Narjii for year 1867-68. The first official estimates national income for Indian union were prepared by the Ministry of commerce, govt. of India in year 1948-49. The Central Statistical Organisation (CSO) has been entrusted with the work of estimating national income of India. CSO has introduced new series on national income with 1993-94 as the base year In India methods combination of product method and income method is used for estimation of National income. Product method is particularly used in primary sectors and in manufacturing sectors, and Income Method is used in territory sector or service sector.
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