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: Vibhor Jain B.tech CSE(5th Sem) 07916403210

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Vibhor Jain

B.tech/Mba (Dual Degree)

Measurement Of National Income

What is National Income? National income measures the monetary value of

the flow of output of goods and services produced in an economy over a period of time. Measuring the level and rate of growth of national income (Y) is important for seeing: The rate of economic growth Changes to average living standards Changes to the distribution of income between groups within the population.
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GROSS DOMESTIC PRODUCT

Gross domestic product (GDP) : The total market value of all final goods and services produced within a given period by factors of production located within a country. GDP is the total market value of a countrys output. It is the market value of all final goods and services produced within a given period of time by factors of production located within a country.

Vibhor Jain

B.tech/Mba (Dual Degree)

GROSS DOMESTIC PRODUCT

TERMINOLOGY final goods and services : Goods and services produced for final use. intermediate goods : Goods that are produced by one firm for use in further processing by another firm. value added : The difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage.

Vibhor Jain

B.tech/Mba (Dual Degree)

GROSS DOMESTIC PRODUCT

gross national product (GNP) The total market value of all final goods and services produced within a given period by factors of production owned by a countrys citizens, regardless of where the output is produced.

Vibhor Jain

B.tech/Mba (Dual Degree)

Measurement of National Income

Three methods of measuring national income are :
Value Added Method Income Method Expenditure Method

Vibhor Jain

B.tech/Mba (Dual Degree)

VALUE ADDED METHOD

There are three main wealth-generating sectors of the

economy manufacturing and construction, primary (including oil& gas, farming, forestry & fishing) and a wide range of service-sector industries. This measure of GDP adds together the value of output produced by each of the productive sectors in the economy using the concept of value added. .

Vibhor Jain

B.tech/Mba (Dual Degree)

VALUE ADDED METHOD

Value added is the increase in the value of goods or

services as a result of the production process. Value added = value of production - value of intermediate goods This method is also called output method or production method or consumption method or national income at market price.
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VALUE ADDED METHOD

GVA MP
Value of output Intermediate Consumption = Sales + change in stock Intermediate Consumption GVAFC = GVAMP Indirect taxes + subsidies
=

NVAMP

= GVAMP Depreciation

NVAFC

= NVAMP Indirect tax = NVAMP + subsidy

Vibhor Jain

B.tech/Mba (Dual Degree)

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VALUE ADDED METHOD

GVA (MP) = Gross Value Added at Market Price
GVA (FC) = Gross Value Added at Factor Cost NVA (MP) = Net Value Added at Market Price NVA (FC) = Net Value Added at Factor Cost

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B.tech/Mba (Dual Degree)

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VALUE ADDED METHOD

Q . Calculate net value added at factor cost from the following data.

Items 1.Purchase of materials 2.Depreciation 3.Sales 4.Excise tax 5.Opening stock 6.Intermediate consumption 7.Closing stock

(Rs. In crores) 30 12 200 20 15 48 10

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B.tech/Mba (Dual Degree)

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VALUE ADDED METHOD

Solution:-- GVA MP
= Value of output Intermediate Consumption Sales + change in stock Intermediate Consumption = 200+ (10 -15) 48 = 200 - 5 - 48 = 200 - 53 = Rs.147 Crores

NVAMP

NVAFC

= GVAMP Depreciation = Rs. 147 12 = Rs. 135 crores = NVAMP Indirect tax = 135 20 = Rs. 115 Crores
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VALUE ADDED METHOD

Q :- Calculate gross value added at factor cost from the following data. Items (Rs. In crores) 1. Sales 100 2. Subsidies 2 3. Consumption of fixed capital 5 4. Closing stock 10 5. Purchase of raw materials 50 6. Opening stock 15 7. Indirect tax 10 Solution:- GVAMP = Value of output Intermediate consumption = Sales+change in stock - 50 = 100+ (10-15) 50 =100- 55 = 45 crores GVAFC = GVAMP Indirect taxes + subsidies = 45 10 +2 = Rs. 37 crores
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INCOME METHOD
The income method measures national income from the side of payments made to the primary factors of production in the form of rent, wages ,interest and profit for their productive services in an accounting year. Components of domestic income:1.Compensation of employees:- (This is the reward or compensation paid to employees for rendering productive services. It includes wages and salaries, Employers contribution to social security schemes, dearness allowance, bonus, city allowance, house rent allowance, leave travelling allowance etc.) 2.Operating surplus:- It includes rent, profit and interest. Profit includes corporate tax, dividend and undistributed profit. 3.Mixed income of self employed:- Income of own account workers like farmers, doctors, barbers etc, and unincorporated enterprises like small shopkeepers, repair shops retail traders etc, is known as mixed income.
Vibhor Jain B.tech/Mba (Dual Degree) 15

INCOME METHOD
compensation of employees Includes wages, salaries, and various

supplementsemployer contributions to social insurance and pension funds, for examplepaid to households by firms and by the government. proprietors income The income of unincorporated businesses. rental income The income received by property owners in the form of rent. corporate profits The income of corporations. net interest The interest paid by business. indirect taxes minus subsidies Taxes such as sales taxes, customs duties, and license fees less subsidies that the government pays for which it receives no goods or services in return.

Vibhor Jain

B.tech/Mba (Dual Degree)

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INCOME METHOD
net business transfer payments Net transfer

payments by businesses to others. surplus of government enterprises Income of government enterprises net national product (NNP) Gross national product minus depreciation; a nations total product minus what is required to maintain the value of its capital stock. statistical discrepancy Data measurement error. personal income The total income of households.
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INCOME METHOD
Q 1:- From the following data, calculate national income by income method Items (Rs. In crores) 1. Compensation of employees 800 2. Mixed income of self employed 900 3. Net factor income from abroad - 50 4. Rent 350 5. Profit 600 6. Consumption of fixed capital 200 7. Net indirect taxes 250 8. Interest 450 9. Operating Surplus 1400
Vibhor Jain B.tech/Mba (Dual Degree) 18

INCOME METHOD
GDPMP = Compensation of employees + mixed income of self employed + operating surplus + depreciation +net indirect taxes =200+250+800+ 1400 (350+600+450)+900 =3550 GNPMP = GDPMP + NFIA = 3550 +(-50) = 3500 NNPMP = GNPMP Dep. = 3500- 200 = 3300 NNPFC = NNPMP- NIT =3300- 250 =Rs. 3050 crores
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EXPENDITURE METHOD
There are four main categories of expenditure:

Personal consumption expenditures (C): household spending on consumer goods Gross private domestic investment (I): spending by firms and households on new capital, that is, plant, equipment, inventory, and new residential structures Government consumption and gross investment (G) Net exports (EX - IM): net spending by the rest of the world, or exports (EX) minus imports (IM)

GDP = C + I + G + (EX - IM)

Vibhor Jain

B.tech/Mba (Dual Degree)

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EXPENDITURE METHOD
Q. From the following data , Calculate national income by expenditure

method.

Items (Rs. In crores.) 1. Compensation of employees 1,200 2. Net factor income from - 20 3. Net indirect taxes 120 4. Profit 800 5. Private final consumption expenditure 2,000 6. Net domestic capital formation 770 7. Consumption of fixed capital 130 8. Rent 400 9. Interest 620 10. Mixed income of self employed 700 11. Net exports - 30 12. Govt. final consumption expenditure 1,100 13. Operating surplus 1820 14. Employers contribution to social security scheme 300
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EXPENDITURE METHOD
Solution:- ( Expenditure Method)

GDPMP = Depreciation + private final consumption expenditure + net domestic capital formation + net exports + Govt. final consumption expenditure. = 130 + 2,000 + 770 + (- 30) + 1,100 = 3,970 crore GNPMP = GDPMP + NFIA =3,970 + (-20) =3,950 crore NNPMP = GNPMP Depreciation = 3,950 130 = 3,820 crore NNPFC = NNPMP NIT = 3,820 120 = Rs.3,700 crore
Vibhor Jain B.tech/Mba (Dual Degree) 22

DEVELOPMENT IN INDIAN ECONOMY

Economic development in India

still depends on the various sectors that constitute the Indian economy : Agriculture Services Manufacturing industries
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DEVELOPMENT IN INDIAN ECONOMY

India is rated as one of the top economies in the world

in terms of purchasing power parity (PPP) of the gross domestic product (GDP) by leading financial entities of the world, such as the International Monetary Fund, the World Bank, and the CIA (as referenced in the CIA World Fact book). As far as agriculture is concerned, India is the second largest in volume of output. Certain related sectors of agriculture have played a major role in the development of the Indian economy by providing employment to a number of people in the forestry, fishing and logging industries.
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DEVELOPMENT IN INDIAN ECONOMY

In 2009, the agricultural sector contributed 17.5% to

the entire GDP, and more than 50% of the total labor force working in India is employed in the agricultural sector. Production volume has gone up in Indian agriculture at a consistent rate since the 1950s. Much of this improvement can be attributed to the five-year plans that were established for the development of Indian agriculture. Developments in irrigation processes, as well as various modern technologies used have contributed to the overall advancement of agricultural processes.
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DEVELOPMENT IN INDIAN ECONOMY

In the industrial arena, India is 14th in terms of volume

of factory output. Various developmental initiatives are also being carried out in the areas of gas, mining, electricity and quarrying. All these sectors contribute significantly to the GDP, and provide jobs to Indias citizens. India is regarded as the 15th best economy in terms of production in the services sector. A sizeable amount of the Indian workforce is also employed by the service sector. In the ten-year period between 1990 and 2000, the rate of growth has been 7.5%, up from 4.5% during the 30-year period from 1951 to 1980.
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DEVELOPMENT IN INDIAN ECONOMY

An increasing number of Indian companies have emerged as leading global players. The following Indian companies are part of the Forbes Global 2000 list for the year 2009:

Reliance Industries Limited (RIL) State Bank of India (SBI) Oil and Natural Gas Corporation (ONGC) Steel Authority of India Limited (SAIL) Reliance Communications Larsen and Toubro Limited (L&T) Bharat Petroleum Corporation Limited (BPCL) Bharat Heavy Electricals Limited (BHEL) HDFC Bank Tata Consultancy Services (TCS)
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Thank You Questions and queries

Vibhor Jain

B.tech/Mba (Dual Degree)

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