2. • National Income measures the total value of
goods and services produced within the
economy over a period of time.
• CSO ( Central Statistical Organisation ) is given
the task of estimating the National Income of
India & publishes its estimates in its
publication, Estimates of National Income.
4. Methods of Measuring NI
• Net output or value added method or product
Method
• Factor income or income Method
• Expenditure Method
5. Product Method
• In this method, national income is measured as a
flow of goods and services. We calculate money
value of all final goods and services produced in
an economy during a year. Final goods here refer
to those goods which are directly consumed and
not used in further production.
• In the value of final goods,value of intermediate
goods is already included therefore we donot
count value of intermediate goods in national
income otherwise there will be double counting
of value of goods.
6. Value Added Method
• To avoid the problem of double counting we
can use the value added method in which not
the whole value of a commodity but value
addition at each stage of production is
calculated and these are summed up to get
national income.
7. Factor Income Method
• Known as income method and factor share
method.
• NI= Rent+ Wage +Interest +Profit
• In this method income received by all the
basic factors of production in the production
process are summed up.
8. • The income method measures national
income from the side of payments made to
the primary factors of production in the form
of rent ,wage, interest and profit for their
productive services in an accounting year.
9. Steps in Income Method
1. Obtain Net Domestic Product at Factor cost
by summing up factors payment paid in form of
wages and salary ,rent ,interest and profit by all
production units of all sectors in the country.
2.Add Net Factor Income from abroad in Net
Domestic Product at factor cost to obtain Net
National Product at Factor Cost (NNP at FC ) or
national income.
10. Expenditure Method
• It is also known as final product method. In
this method total national expenditure is the
sum of expenditure incurred by the society in
a particular year.
11. Components of Expenditure Method
• GDP = C + I + G + (X – M)
• C: Household spending(consumption)
• I: Net Domestic Investment Spending
• G: Government spending
• X: Exports of goods and services
• M: Imports of goods and services
12. • Income method and Product method are
often employed for calculating National
Income.But expenditure method is difficult
method because of the reliability of the data.
• Product method is used in Agriculture and
Industrial sector.
• Income method is used to find the
contribution of the service sector
