TNPSC Indian Economy Study Materials Part 1 - National Income

National Income:

In simple words, National Income is the total value of all goods and services produced by a country in a particular year.

The National income can be derived from a number of measures like GDP, NDP, GNP, NNP which are explained below.

GDP (Gross Domestic Product)

• Total value of all goods and services produced within the Boundary of a country (Including foreigner's Production within the country).

Depreciation

• Usually goods once produced under goes wear and tear and hence depreciation occurs.
• When calculating the Net Value  the depreciation value will be deducted.

NDP (Net Domestic Product)

• NDP is value of GDP after the Depreciation reduction.

NDP = GDP - Depreciation

Net Factor Income: Difference between the Exports and Imports

GNP (Gross National Product)

GNP = GDP + Net factor Income

NNP (Net National Product)

• NNP is value of GNP after the Depreciation reduction.

NNP = GNP - Depreciation

The above mentioned measures can be calculated at factor cost and market cost.

Factor Cost: It is the production cost, it includes subsidies and excludes indirect taxes.
Market Cost: It is the market price of a product, it excludes subsidies and includes indirect taxes.


National Income

• NNP at factor cost is said to be National Income.

National Income = NNP at factor cost

Personal Income and Disposable Personal Income

• Personal Income includes sum of all the incomes received by a person.
• Disposable income is the amount available which can be spent at his will. 

Disposable Income = Personal Income - Direct Taxes

Per Capita Income

• Amount of Money earned per person.
• It can be calculated as follows

Per Capita Income = National Income / Population

Methods of Computing National Income

• Product Method
• Income Method
• Expenditure Method