1. National Income Accounting

2. National Income Estimation
Economic performance
Economic analysis
Forecasting
Indicator of Nation’s Economy
As a means of indicating changes in a country’s standard of living
To indicate changes in economic growth of a country
As a means of comparing the economic performance of different countries

3. World Bank 2005
Up to US $ 875 = Low income countries US $ 876 – US $ 3465 = Lower Middle US $ 3466 – US $ = Upper Middle More than US $ = high income

4. Measurement of National Income
Income Approach
 NNP at factor cost OR National Income
Output Approach
 GDP at factor cost
Expenditure Approach
 GDP at market Prices

5. Expenditure Approach C+I+G+X-M
GDP at market price - Indirect sales tax + Indirect subsidies  GDP at factor cost Net income from abroad GNP at factor cost Depreciation NNP at factor cost
 Output Approach
Factor Income-from abroad
Factor Income paid abroad 
Income Approach
 W+I+R+P

6. Expenditure Approach C+I+G+X-M
GDP at market price - Indirect sales tax + Indirect subsidies  GDP at factor cost Net income from abroad GNP at factor cost Depreciation NNP at factor cost
 Output Approach
Factor Income-from abroad
Factor Income paid abroad 
Income Approach
 W+I+R+P

7. Income Approach W+I+R+P = NNP at factor cost
Profits are stated net of depreciation / capital consumption allowances
If the figures exclude net income from abroad, NDP at factor cost can be obtained.
NDP at factor cost + Net income from abroad =

8. Output Approach
The total value of the final goods and services produced by the primary / secondary / tertiary industries
In order to avoid double counting, the value-added method is adopted to exclude intermediate goods.
GDP at factor cost + Indirect Taxes – Indirect Subsidies =
Distinguish between Indirect / Direct / Business / Personal Taxes

9. Expenditure Approach
People spend their income. Thus, the total expenditure on final goods and services must be equal to the total value of final goods and services produced domestically.
Any output that is not sold to consumers is bought by producers in the form of unintended inventory investment.
C+I+G+(X-M) = Aggregate / Total expenditure

10. Items excluded from National Income Accounting
Second-hand goods
Intermediate goods
Non-marketed goods / services
Volunteer work / Housework
Unreported / Illegal market transactions

11. Merits & Uses of National Income Statistics
Reflecting & comparing the standards of living of different countries
Per capita real GNP  standard of living
Providing information to the government and firms for economic planning
Reflecting the economic growth of a country
% change in real GNP over a period of time

12. Limitations of National Income Statistics
Factors that may understate the standard of living / the welfare
Exclusion of the value of leisure
Same Q produced with fewer working hours  higher welfare
Exclusion of non-marketed / unreported transactions

13. Limitations of National Income Statistics
Factors that may overstate the standard of living / the welfare
Undesirable Side-effects of Production
Air pollution / traffic congestion /…
Understate the real / social costs to society  externality /divergence between social costs & private costs

14. National Income concepts
GDP at Market Price
GDP at Factor Cost
GNP at Market Price
GNP at Factor Cost
NDP at Market Price
NDP at Factor Cost
NNP at Market Price
NNP at Factor Cost
Personal Income
Disposable Income

15. GNP mp
GDP
NNP fc
NDP
NNP mp
- depreciation
-net income from abroad
-net indirect taxes

16. National Income Estimates in India

22. Thanks