TOPIC: NATIONAL INCOME ACCOUNTING IN INDIA WITH REFERENCE TO THE YEAR 2010-2011
What is NATIONAL INCOME?
The concept of National Income is worth elaborating as it is the index of economic development. Innumerable varieties of goods are produced in an economy in a year. These goods or output are expressed in monetary terms. The aggregate of monetary values of all verities of goods produced in a country during a given period, usually a year is called National product. For the production of innumerable varieties of output, four factors of production have their respective contribution for which they are paid in terms of * rent,
* interest and
The sums of their enumerations constitute the national income. This total income is spent on buying the output produced (National Product). Thus the total income will be the total expenditure made on the national product. Therefore National Product = National Income = National expenditure.
The study of National Income is important because of the following reasons: * To see the economic development of the country.
* To assess the developmental objectives.
* To know the contribution of the various sectors to National Income.
TRADITIONAL DEFINITIONS OF NATIONAL INCOME:-
There are three main definitions of national income by Marshall, Pigou and Fisher.
1. Marshall's definition:-
Marshall defines national income as the labour and capital of country acting on its natural resources produce annually certain net aggregate of commodities, material and. immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend. According to Marshall all types of goods and services whether they come to market or not are included in the national income to him national income means net national income. The net total output is added up from different productive activities in order to arrive at national, income. Net national income can be found out by deducting the charges of depreciation and wearing out of the machinery. Incomes from abroad should be added in the national income.
According to Pigou the incomes which can be expressed in terms of money are included in national income. He said that "The national dividend is that part of the objective income of the community including of course income derived from abroad, which can be derived in money.
Fisher defines national income on the basis of consumption of commodities. Consumption is the basis of estimating national income. According to Fisher "The national dividend or income consist solely of services as received by ultimate consumer whether from their material or from their human environments. Thus a 'piano or an overcoat made for me this year is not a part of this year’s income, but an addition to the capital. Only the services rendered to me during this year by these things are income". Fisher's definition is more accurate and correct than that of Marshall and Pigou. According to Fisher national income of a country is determined not by its annual production, but by its annual consumption.
HOW IS NATIONAL INCOME ESTIMATED IN INDIA?
For estimating national income, India follows the methodology suggested by the United Nations. This, however, is more suitable for developed countries rather than for underdeveloped ones, which are largely characterised by non-monetised and unorganised sectors. The enterprises in underdeveloped economies produce at subsistence levels and are functionally undifferentiated. In addition to producing agricultural commodities, they take to other avocations (non-agricultural) during off-season and do not keep proper records of their secondary and primary inputs of production. Small capital assets, which may not be very important for a developed economy and therefore excluded from fixed capital investment are crucial for...