National Income of India

⇒ National Income is the money value of all the final goods & services which produced by a country during one year.

⇒ India is now the world’s 3rd largest economy in terms of real prices and purchasing power.

⇒ For national income, the Indian economy is divided into 14 broad sectors which are grouped into 3 main categories.

Sector Activity
Primary Sector Agriculture and Allied
Mining & Quarrying
Secondary Sector or Industrial sector Manufacturing
Electricity, Gas and Water Supply
Tertiary Sector or Service Sector Trade, Hotels and Restaurants
Financing, (Banking Insurance)
Real Estate and Business Services
Community, Social, Personal and other Services

Measures/Concepts of National Income

1. Gross Domestic Product (GDP): GDP is the total money value of all final goods & services produced within the geographical boundaries of the country (produced by resident citizens +foreign nationals) during a given period of time, generally one year.

GDP = Q × P

Q = Total quantity of final goods & services.
P = Price of final goods & services.

2. Gross National Product (GNP): GNP is the money value of total output or production of final goods & services produced by the nationals of a country during a given period of time, generally a year. In this case, the income of all the resident & non-resident citizens of a country is included whereas the in-come of foreign nationals who reside within the geographical boundary of the country is excluded.

GNP = GDP + (X – M)

X = Export of goods & services
M = Import of goods & services
X – M = Net Factor Income from Abroad (NFIA)


3. Net National Product (NNP):

⇒ Net National Product (NNP) can be calculated in 2 ways:-

(i) NNP at market price:

NNP = GNP – Depreciation

Depreciation means wear & tear of goods produced. NNP at market price includes In-direct taxes and excludes subsidies.

(ii) NNP at factor cost:

⇒ NNP at factor cost calculates National Income only on the basis of cost incurred to produce the goods & services. This cost is the payment made to the factors of production.

NNPfc = NNPmp – Indirect Taxes + Subsidy

⇒ When NNP is obtained at factor cost, it is known as National Income.

⇒ Likewise, GDP at factor cost also can be calculated.

GDPfc = GDPmp – Indirect Taxes + Subsidy

4. Personal Income :

⇒ It is that income which is actually obtained by nationals in one year.

⇒ P.I. = National Income – Undistributed Proits of Corporation – Payments for Social Security Provisions – Corporate Taxes + Government Transfer payments + Business Transfer payments + Net Interest paid by government.

⇒ SOCIAL SECURITY PROVISIONS = Payments made by employees towards pension & provident fund.

⇒ TRANSFER PAYMENTS = Payments made not against any productive activity. eg. – old age pension, unemployment compensation, disaster relief payment, etc

5. DISPOSAL PERSONAL INCOME (DPI): Income that is available to individuals that can be disposed at their will.

DPI = Personal Income – Direct Taxes.

6. National Income at constant price & current price.

⇒ NI CONSTANT PRICE = Total quantity of all final goods & services produced in a particular year × Price of base year.

⇒ Base year of National Income accounts is the year chosen to enable inter – year comparisons. The new series changes the base to 2011–12 from 2004–05.