What is National Income? Concept, definition, measurement and all you need to know


If the gap between the GDP and NDP is narrower or smaller, then it is considered good for an economy. However, a wider gap between the GDP and NDP shows an increase in the value of obsolescence. Production that is achieved by the citizens living in different nations. This was done in accordance with the recommendation of the National Statistical Commission , which had advised to revise the base year of all economic indices every five years. This method emphasises on aggregating the payments made by firms to households, called factor payments.

  • Is total cost of all factors of production used in producing goods or services.
  • Today, India is the highest recipient of private remittances in the world—as per the World Bank projected at $72 billion in 2015 (in 2013 it was $70 billion, the year’s highest).
  • Inflationary pressures appear to be on the decline and the country has a strong external account, it said in the Monthly Economic Review for August released on Saturday.
  • NDP is not used in comparative economics, i.e., to compare the economies of the world.
  • While GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP gives the picture from the consumers’ side or demand perspective.

Accordingly, these two concepts become different aggregates when taxes and subsidies are introduced in the market. The gross national product which is called GNP and the Gross Domestic Product which is called GDP are two of the most essential and basic concepts that the students of Commerce need to know. Briefly, we can say that the Gross Domestic Product or the GDP is the value of finished goods and services of the nation at the domestic level and in the specific period. While on the other hand gross national product which is to say GNP is the total value of all the finished goods and the services produced by the citizens of the country.

Net Domestic Product at Market Prices (NDPMP) – Indian Economy Notes

Green GDP is a term used generally for expressing GDP after adjusting for environmental damage. When information on economy’s use of the natural environment is integrated into the system of national accounts, it becomes green national accounts or environmental accounting. This is a measure of how much a country can consume in a given period of time. NNP measures output regardless of where that production has taken place . GDP is the total value of all final goods and services produced within the boundary of the country during a given time period, generally one year.

the difference between gdp and ndp is known as

GDP growth rate is a major indicator of the development rate of an economy and is one of the major parameters considered while analysing the overall health and performance of the country. It includes wages, interest, rent, profit, received by factors of production like labour, capital, land and entrepreneurship of a nation. A sector-wise breakdown provided by the GVA measure helps policymakers decide which sectors need incentives or stimulus and accordingly formulate sectorspecific policies.

Calculation of GDP

The value added or production method is used by economists to calculate GDP at market prices, which is the total values of outputs produced at different stages of production. It needs to be mentioned that caution should be taken to take final Goods and not Intermediate difference between associate and assistant professor goods, as it will result in Double Counting. The production output for determining GDP takes into account the total output produced by a country minus the goods consumed in the process. Only the final value of goods and services is considered to avoid double counting.

  • This measure allows policy-makers to estimate how much the country has to spend just to maintain their current GDP.
  • A final goods and services means goods and services meant for final consumption .
  • Production taxes or production subsidies are paid or received with relation to production and are independent of the volume of actual production.
  • Gross Domestic Product is the value of the all final goods and services produced within the boundary of a nation during one year period.

It is also calculated by adding national private consumption, gross investment, government spending and trade balance (exports-minusimports). The use of the exports-minus-imports factor removes expenditures on imports not produced in the nation, and adds expenditures of goods and service produced which are exported, but not sold within the country. The major point of difference between domestic income and national income is that the factors that may comprise domestic income may not fall under national income and vice versa. It is due to the fact that national income is inclusive of the earnings of regular residents irrespective of their place of income.

What is income method in National Income?

The word “domestic” in Gross Domestic Product pertains to the fact that only the goods and services produced within a country are counted in the GDP. It is a ‘quantitative’ concept and its volume/size indicates the ‘internal’ strength of the economy. But it does not say anything about the ‘qualitative’ aspects of the goods and services produced. National Income can be referred to as the value of goods and/ or services produced by a country during a given financial year. Production done by foreign nationals in an economy is calculated in GDP if it is done within the geographical boundary.

  • The total amount of income accruing to a country from its economic activities in a period of one year is known as the country’s national income.
  • The expenditure approach or spending approach calculates GDP by adding all expenditures made by all individuals in an economy.
  • In current affairs reading Editorials Online needs an in-depth focus and hence we provide a separate analysis of daily editorials which is not found in any other website.
  • The net domestic product is defined as the net value of all the goods and services produced within a country’s geographic borders.

Abhipedia , 360 degree exam Preparation platform is a product of 22 years of Experience of Abhimanu Expert Sh Parveen Bansal, caters to learning needs of students. To show the achievements of the economy in the area of research and development, which have tried cutting the levels of depreciation in a historical time period. National income is measured through Gross Domestic Product , Net Domestic Product , GNP , and NNP . Depreciation refers to the wear and tear occurring in the process of production. Net Output of Commodities and Services flowing during the year from the country’s productive system in the hands of the ultimate consumers. Such a rise, along with a decline in the value of the capital stock, suggests economic stagnation.

With the industrial output and consumer price numbers released, all eyes are now set on the growth numbers.

The Indian economy’s growth rate fell from 8-9 per cent to 5-6 per cent during the next few years as a result of the recession in 2008. Despite the fact that the growth rate had slowed, it had never fallen below zero. So, throughout the last decade, the GDP at market prices has constantly climbed year on year.

the difference between gdp and ndp is known as

Net exports include the goods and services produced by a country, which are exported overseas minus the imports. Consumption of fixed capital is the depreciation of fixed assets (plant, machinery, etc.), owned by a firm, during a financial period. The income approach for determining GDP is a summation of all incomes that companies pay to hire the workforce. When GDP is determined based on this approach, it is referred to as gross domestic income or GDP .

Types of Costs – Important Concepts to Remember

Depreciation is subtracted from the gross domestic product to arrive at this figure. NDP is not used in comparative economics, i.e., to compare the economies of the world. Where C is the consumption expenditure, G is government expenditure, I is the investment, and NX is the net exports. Consumption expenditure is the cumulative final consumption spending https://1investing.in/ of private households and the government. No National Income is the total value of all services and goods that are produced within a country while Gross Domestic Product is defined as the value of the goods and services generated within a country. With the industrial output and consumer price numbers released, all eyes are now set on the growth numbers.

Market Dashboard

It may be the case that after certain time these capital goods needs replacement. Basically, GNP signifies how a country’s people contribute to its economy. It considers citizenship, regardless of the location of the ownership. GNP does not include foreign residents’ income earned within the country. GNP also does not count any income earned in India by foreign residents or businesses, and excludes products manufactured in the country by foreign companies.


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