Difficulties in Calculating

NATIONAL INCOME

(INDIA)

ANIMESH KAR

What is National Income ?

Is a money value of goods and services produced in an economy during one accounting year.

5 Major Difficulties in Calculating National Income

1. Non-Monetary Transactions

2. Small Producers

3. Illegal Earnings

4. Double Counting

5. Mixed Income

1. Non-Monetary TransactionsServices of housewives have been have been excluded from the estimation of national income. In this event the value of national income would go down. In countries like India non-monetised transactions are considerable. So it does not come to the market. This is a difficulty faced while calculating national of our country.

2. Small ProducersThey do not keep record of the quantity and value of their output. It is difficult to reliable information’s about the value and volume of their output. Therefore it is difficult while calculating the national income because they do not appear in the national income.

3. Illegal EarningsThe income through illegal activities is not included in national income for example income earned through gambling or others illegal earnings.

4. Double CountingIts is the main problem arises while calculating national income. This arises due to failure of distinguish between the final and intermediate goods. To solve this problem only final goods are taken into account which is not an easy task.

5. Mixed Income

A grave problem arises in regarding allocation of income among the factors. This makes the task difficult in calculating national income.

Conclusion

In a country like India, it is not possible to calculate national income using a single method.

Different methods are being adopted for different sectors. Everything depends upon

accuracy of data and the estimation procedure.