National Income - UPSC

National income

The first attempt to calculate the national income of India was done by Dadabhai naoroji. According to them in 1868 per capita income was 20 INR. He published a book called Poverty and Unbritish Rule in India where he mentioned his study about national income of India. At present, the national income of India is calculated by CSO. CSO stands for Central statistical organisation .

National Income

If you want to understand the concept of national income then first we need to understand these terms,  GDP stand for Gross Domestic Product,
NDP stand for  Net Domestic Product,
GNP stand for  Gross National Product and
NNP stand for  Net National Product

Gross Domestic Product

The final monetary value of all goods and services produced by an economy in a financial year is called GDP. (India's financial year is from 1 April to 31 March )

Net Domestic Product

When we subtract the depreciation from GDP then we get NDP.

NDP = GDP - Depreciation

A reduction in the value of an asset with the passage of time, due in particular to wear
and tear.

Gross National Product

Total monetary value of goods and services by Indian nationals, whether they are in India or outside India is called GNP.

GNP = GDP + X - M

X = Income earned by Indians in abroad. 
M = Income earned by foreigners in India.

Net National Product

NNP = GNP - Depreciation

Now let's jump on National Income

National Income

Factor Cost

When we produce a product including land, labour, capital, organiser, how much it costs us is called factor cost.

Factor Cost = Total Cost / Total Quantity

Market Price

when a buyer buy something in market, that price is called market price. Market price is a inclusion of indirect taxes in Factor Cost.

Market Price = Factor Cost + Indirect Taxes

NNPMP = NNPFC + Indirect Taxes

NNPFC = NNMP - Indirect Taxes + Subsidy

When indirect taxes are deducted from the net national product received at market price and subsidy is added, then it gives us the national income.

Per Capita Income = National Income / Total Population

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