1.

10 Major Problems in Measuring National Income

The following points will highlight the ten major Problems in Measuring National Income:

1. Exclusion of real transactions – GDP includes the money value of those items which
are sold through the market at current price. In developing countries like India a major
portion of output is not sold through the market. And value of these transactions get
excluded.
2. The value of leisure - Some of the leisure is used to render household
services that escape inclusion in GDP. 
3. Cost of environmental damage – cost are associated with pollution and other aspects
of the industrial activity that damage the environment. The coss of environmental
damage are not subtracted from the market value of final products when GDP is
calculated.
4. The underground economy – it includes transactions involving illegal goods and
services, such as trading in harmful drugs, gambling etc. these illegal goods and
services are final products that are not included in GDP.
5. Transfer payments and capital gains – all domestic transfer payment are excluded
from national income of a country.
6. Valuation of inventories – problem is faced during inventory valuation due to changes
in price level.
7. Self-consumption – goods used for self consumption is not included in GDP
8. Lack of official records – another problem arises due to lack of reliable data due to
which it is difficult to include proprietor’s income.
9. Imputed income - Imputed income such as income from owner-occupied houses and
flats is a part of a person’s taxable income. Therefore, it is a part of national income.
10. Valuation of government service - government services provided to people free of
cost are also to be included. However, it is very difficult to find the true values of
such services, since these are not sold through the market.

The Challenge of Total Factor Productivity Measurement

Knowledge capital is important for understanding precisely how process and product
innovations are generated and diffused inputs.the Canberra Group on capital
measurement also addressed the problems involved in measuring capital input. .
Information on the real and nominal purchases of intermediate inputs by industry
comes from the system of input-output tables published by Statistics Canada