National Income

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National Income
Some countries are rich, some are poor and yet some others are inbetween. How do we measure the performance of an economy? Performance of an economy is related to the level of production (of goods and services) or total economic activity. Measures of national income and output are used in economics to estimate the total value of production in an economy. The standard measures of income and output are Gross National Product (GNP), Gross Domestic Product (GDP), Gross National Income (GNI), Net National Product (NNP), and Net National Income (NNI). In India, the Central Statistical Organisation has been estimating the national income. You measure your academic performance in relation to other students by the percentage of the marks scored by you. Similarly a country’s economic performance has been measured by indicators of national income such as GDP or GNP. Further, measuring national income is essential for various purposes that include projection about the future course of the economy, assisting government as the basis to design (or redesign) suitable development policies, helping firms in forecasting future demand for their products and facilitating international comparison.

National income per person or per capita income is often used as an indicator of people’s standard of living or welfare. However, many development economists have criticized that GNP as a measure of welfare has many limitations. They argued that human well-being does not depend on national income alone. As measures of GNP exclude poverty, literacy, public health, gender equity, and many human issues of well-being, they developed other measures of welfare such as the Human Development Index (HDI).

Some rich countries in terms of national income are poor in human development. Similarly, poor countries in terms national income have performed well in human development. In the case of India, though the GDP 57

is growing faster, its performance in terms of HDI is far below than...
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