National income is the total value a country’s final output of all new goods and services produced in one year. Understanding how national income is created is the starting point for macroeconomics.
4 ways to measure national income are
Gross Domestic Product (GDP), Gross National Product(GNP), Net Domestic Product(NDP)and Net National Product(NNP)
GDP: Net value of all goods and services produced within boundary of a nation for an year. Per annum change in GDP is growth rate of economy.
GDP of India 1.877 trillion USD (2013)
India’s average gross domestic product (GDP) growth has been estimated to grow by 7.3 per cent in 2016 and 7.5 per cent in 2017, up from 7.2 per cent in 2015.
If value of domestic currency falls compared to foreign currency, domestic currency is said to be depreciated.
GNP : GDP + Income from abroad as well
But income from abroad is always negative for India
Thus GNP is lower than GDP for India
GNP is national income which is used by IMF to rank nations on volume and PPP
India is 3rd largest by PPP(purchasing power parity)
India ranks 7th by nominal GDP
Trade balance: Difference of exports and income, was + ve consecutively for 3 years from 2000 to 2003 due to booming service sector
Interest of external loans: Difference of interest paid for loans and received for given.For india its always negative as we have high borrowings
Private Remittance: Net money transferred by citizens in home country to abroad or citizens abroad to home.
NNP is national income of country.
NNP/total population gives per capitia income of nation
Income of an economy can be calculated at factor cost or market cost
Factor cost is cost incurred to producer while market cost is cost at which good is made available in market.
In India factor cost is used.
Income can be calculated at current or constant(base) price.Difference between current and constant price is impact of inflation.
Base year in India has been revised from 2004-05 to 2011-12.
Our national income is calculated at constant prices base year.
Nominal Income: wage someone gets in hand, calculated at current market price
Real Income : Nominal income adjusted according to inflation ,, nominal income – inflation
Disposable income :Net part of wage the part one is free to use, after deducting taxes and all from nominal or real income.
National Income at factor cost=NNP at market cost-Indirect taxes
Subsidies are added in the national income at the market cost to derive the national income at factor cost
National Income at Factor Cost = NNP at Market Cost + Subsidies
National Income at Factor Cost = NNP at Market Cost – Indirect Taxes + Subsidies