National income is the total value of all final goods and services produced in a country in a year. It is measured using three methods: production, income, and expenditure. The production method sums the value of output. The income method sums incomes from factors of production like wages, profits, rent. The expenditure method sums consumption, investment, government spending, and net exports. India's economy is divided into agriculture, industry, and services. Over time, agriculture's GDP share has fallen while services has risen significantly. National income statistics help analyze economic growth, standard of living, and income distribution.

1. DR. HARI SINGH GOUR CENTRAL
UNIVERSITY, SAGAR
DEPARTMENT OF BUSINESS MANAGEMENT
2017-2018
A PRESENTATION ON
“NATIONAL INCOME”
SUBMMITED TO
Dr. BABITA YADAV
(ASSISTANT PROFESSOR)
SUBMITTED BY
SAKSHI PACHOURI
SUMAN HARYANI
YASHRAJ JAIN
UTKARSH KHARE
MBA 1st Semester
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2. What Is National Income?
•National income is the money value of all the final goods
and service produced by country during period of one year.
•National income or national product is defined as the total
market value of all the final goods and services produced in
an economy in a given period of time.
•There are many concepts of national income which are used
by different economists and all of which are inter-related.
These are:
•GDP and GNP
•GDP at MP and GDP at FC
•NNP
•PI
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3. Why National Income Is Important?
Measuring the level and rate of growth national income is
important to economists when they are considering: –
• Economic growth and where a country is in the business cycle
• To help government to formulate suitable policy and
development plan to increase growth rate
• Changes to average living standards of the population
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4. • Gross value and Net value:
Gross+depriciation=net value
• Factor cost and Market price:
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Gross value Net value
Purchasing value Actual value
Factor cost Market price
Cost of production Selling price of product
FC
MP
+NIT
-NIT
Net indirect tax=indirect tax – subsidies
•Domestic and National:
Domestic National
Income of all the people
inside the country
Income of the country+
Income from abroad
Domestic
National
+NIFA-NIFA
Gross
Net
-Depreciation+Depreciation

5. • GDP and GNP:
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GDP GNP
It is the total sum of final good produced
in India in a financial year.
GNP mp refers to the total value of all the
final goods and services produced during
the period of one year plus the net factor
incomes earned from abroad during the
year.
GDP include the economic activities of all
the resident of the country
GNP includes the economic activities of all
the residents of a nation whether
operating within the country or outside it.
GDP = market value of goods and services
produced in the country + incomes earned in
the country by the foreigners — incomes
received by resident nationals from abroad.
GNP = market value of domestically
produced goods and services + incomes
earned by the nationals in foreign
countries — incomes earned in the
country by the foreigners.

6. GDP at Market price and GDP at Factor cost:
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•GDP at FC or Factor cost is measured as a payment made to the factors
of production. It is the cost of production.
Whereas GDP at MP or Market price is measured as a payment made by
the consumers to purchase commodities. It is the cost at which goods
reach at market.
Thus, the difference between the two is the net indirect taxes (Indirect
taxes paid - Subsidies received).
•GDP(FC)=GDP(MP)-Net indirect tax
Where,
NIT=indirect tax-subsidies

7. Net National Product at Marker Price (NNP mp)
• NNP at market price is equal to GNP minus the charges of
depreciation and replacements, where depreciation
represents the values of fixed capital consumed during the
process of production.
NNP mp = GNP mp – Depreciation
• The concept of NNP is important because it gives an estimate
of the net increase in the output of final goods and services.
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8. Net National Product at Factor Cost (NNP fc) or
National Income
NNP fc or national income is equal to the sum total of factor
incomes received by the factors of production during the year.
• It is equal to the sum of rent, wages, interests and profits in a
given year.
• The sum total of incomes of the factors of production is
known as national income or net national product at factor
cost.
• Thus, the national income is equal to the NNP at mp minus
revenue of the government by way of indirect taxes plus
subsidies provided by the government to the business sector.
• NNP fc = NNP mp – Indirect taxes + Subsidies
(or)
NNP fc = NNP mp – net Indirect taxes.
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9. • The importance of estimating national income lies in the fact that it
throws light on the distribution of income in a society.
• It helps to see how equitably income is distributed in the societies.
• Which tells us whether there are inequalities of income distribution ,
and if so, how vast is the inequalities.
• It is regarded as the fair measure of over all economic activity of the
nation and is therefore, commonly accepted as an index of economic
conditions prevailing in the country.
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10. National Income at Current Price and Constant Price
when the value of goods and services is found out by
multiplying the quantity produced during one year by the prices
prevailing in that year, we call it National income at Current Prices.
on the other hand, when the value of goods and services is
calculated by multiplying the quantity during one year with prices of
the base year, we call it National Income at Constant Prices.
Example:
(1) q1 is the quantity of final product I in year 1980 and p1 is the price
of that year.
Then, the value of the final product I = q1p1
Similarly, q2 is the quantity of final product II in year 1980 and p2 is the
price of that year.
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11. Then, the value of the final product II = q2p2
If we add up the value of all final goods and services produced, we get
National Income at Current Prices.
So, National Income at Current Price will be:
q1p1+q2p2+ …………….qnpn = NI at Current Prices.
2) Suppose we want to compare the national income figures of 1980
and 1990, we may find that the national income in 1990 is higher than
that of 1980.
This increase in income may be due to
(a) increase in output
(b) increase in prices which may be higher in 1990 than 1980.
To get the exact increase in real income, we need to multiply the
quantity of goods produced in 1990 with the 1980 prices.
This shows:
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12. National Income at Constant Prices: Quantity of Current period x Prices
of Base period.
period Formula for Real National Income:
Income Money National Income (Current year) x
Price Index of Base year
index of current year
Personal Income (PI):
Personal Income (PI) Personal Income i s the total money income
received by individuals and households of a country from all possible
sources before direct taxes.
Per Capita Income:
Per Capita Income of a country is derived by dividing the national
income of the country by the total population of a country. 12

13. Product And Money Flow
• Production of goods and service generates income and
income give rise to demand for goods and service, demand
give rise to expenditure, and expenditure give further rise to
production of goods and service. there is a circular flow of
production, income and expenditure.
• • On the basis of these flows, national income can be
analyzed at
1. as a flow of goods and services
2. as a flow of incomes
3. as a flow of expenditure on goods and services.
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14. 14

15. Measurement of National Income –Net output or
value method
A variety of measures of national income and output are used
in economics to estimate total economic activity in a country
or region, including gross domestic product (GDP), gross
national product (GNP), net national income (NNI),
and adjusted national income . All are specially concerned
with counting the total amount of goods and services
produced within some the economy and by different sectors.
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16. Measurement of national income
The national income of a country can be measured by three
alternative methods
Production Method
income Method
Expenditure method
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17. Production 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 process.
• GNI = Money value of total goods and services + Income from
abroad . services + Income from abroad.
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18. Income Method
• Under this method, national income is measured as a flow of
factor incomes. There are generally four factors of production
labour , capital, land and entrepreneurship. Labour gets
wages and salaries, capital gets interest, land gets rent and
entrepreneurship gets profit as their remuneration.
• GNI = Rent + Wage + Interest + Profit +Income from abroad .
Income from abroad.
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19. Expenditure Method
• In this method, national income is measured as a flow of
expenditure. GDP is sum-total of private consumption
expenditure. Government consumption expenditure, gross
capital formation (Government and private) and net exports
(Export-Import).
GNI = Individual Expenditure +Government expenditure
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20. Net output
Net output is an accounting concept used in national accounts such as
the United Nations System of National Accounts (UNSNA) and
the NIPAs, and sometimes in corporate or government accounts. The
concept was originally invented to measure the total net addition to a
country's stock of wealth created by production during an accounting
interval.
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21. Value Added Method for Measurement of National
Income!
This method is used to measure national income in
different phases of production in the circular flow. It
shows the contribution (value added) of each producing
unit in the production process.
• Every individual enterprise adds certain value to the
products, which it purchases from some other firm as
intermediate goods.
• When value added by each and every individual firm is
summed up, we get the value of national income.
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22. Value added Method is also known as
• Product Method;
• Inventory Method;
• Net Output Method;
• Industrial Origin Method; and
• Commodity Service Method.
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23. GROWTH AND COMPOSITION OF INDIA’S NATIONAL
INCOME
Indian economy is classified in three sectors —
Agriculture and allied, Industry and Services. Agriculture
sector includes Agriculture (Agriculture proper &
Livestock), Forestry & Logging, Fishing and related
activities. Industry includes 'Mining & quarrying',
Manufacturing (Registered & Unregistered), Electricity,
Gas, Water supply, and Construction. Services sector
includes 'Trade, hotels, transport, communication and
services related to broadcasting', 'Financial, real estate &
prof servs', 'Public Administration, defence and other
services'.
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24. SECTORAL DISTRIBUTION OF NATIONAL INCOME
1. Agriculture and allied -Agriculture sector includes
agriculture, animal husbandry, forestry, fishery etc. Are
collectively known as primary sector.
2. Industry -This sector includes manufacturing units both
small and large scale, Mining & quarrying known as
secondary sector
3. services sector - In this sector transport, communication,
banking and finance, insurance, Trade, hotels, broadcasting, real
estate, defence, public Administration are collectively known as
tertiary sector
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26. Source : Calculated from the data provided by Reserve Bank of India, Handbook of statistics of the
Indian Economy (2011-12) and CSO Note: PE Provisional Estimates * 2004-05 survey. 26

27. GDP FLUCTUATION
• The share of the primary sector has gone down from 55.4% of
GDP in 1950-51 to 38% in 1980-81 and further declines to 13.
9% in 2013-14. The share of industry has shown to steady
increase from 15% in 1950-51 to 24% in 1980-81 and 26. 2%
in2013-14 The share of the service sector indicated sharp
improvement from 29. 6% in 1950-51 to about 59. 9% in
2013-14 ther was a significant increase in service sector
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28. GDP GROWTH RATE
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29. REFERENCES
• http://statisticstimes.com/economy/sectorwis
e-gdp-contribution-of-india.php
• http://irjms.in/sites/irjms/index.php/files/arti
cle/viewFile/501/438
• http://statisticstimes.com/economy/sectorwis
e-gdp-contribution-of-india.php
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