National Income and Accounting

National Income and its

- 2 Accounting
Concept of GDP as a main factor to determine
nation imomewas Simon Kuznets
given by .

He is also
regarded fatherFries
as .

Econometrics is branch #
of
a

uses statical and mathematical

analysis
in
subject of economies

GDI
is
defined as total value added created
by resident of eounky-#year
Total Value addition can be calculated
at (A)
-

Market toric ( MP3

-

(B) -

Factory cost CF C)
lets understand
But before to
get idea of MP FC
of
resident
what is
GDP
meaning of and
country to
define
.

in endia
Resident → Any person residing
for the
for more then 182
dogs purpose of
shall be considered
miome
generation as
resident except he is
working in
High commission /
embassy or office of international organisation .

working embassy
An Indian in US in India ,
eg :
,

his income will be part of USA's GDP where

income
of Indian working at
as
in Indian
USA his income will be Embassy
the
partof India's GDP

country -

e il
Any production activity by resident under
land boundaries India will be part of India's GDP
of
for sea boundaries concept of Exclusive
where as

Economic zone ( EEZ ) is

seashore 12
miles
being
nautical
used
200 n m
-

T÷÷É÷E
to nautical miles it is
from seashore zoo

countries EE 2- that means

any
economic
activity
in that area will be
part of that
country 's GDP .

b/w two or
In case
conflict to determine EE 2-
countries UN Sea law convention is used to
area

more

determine EEZ .
Markettouieandtatooicost
Market Price = Factor lost +Indirect -
Subsides
Tates

MP = Fenton + IDT -
Subsides

FC = MP f- Subsides -
I. D. T

Produce
→
Country A
only product Marketprice of ✗ =2oo$
✗
Total production of ✗ Loo Unit =

Then GDP at Market price GDPMP = Loo ✗ too

= 2ooo$

and
Subsidy given by county Ais 20$ on each
unit indirect tax on is fsenunit 40$ then
MP =
FC 1- IDT -
Subsidy
Loo =
Fc + Ho - ho

FC = Loo tho -40

=
180

GD Pfc =
1800$
GD Pfc -1 Indirect taxes Subsides
GDPMP
-

=
GDP income particular
generated in area or
territory
It show where income
that is domestic
-
product .

' '

who has
is
being generated and not generated that
income India's GDP shows income income
:
eg
generated in India which includes income generated
by Indian companies
India .
as well as
foreign companies in
( citizens 1
In order to calculate income of Indians
concept of Gross National Product CGNP ) is

used
GNP = GDP + Factor Income generated -
Factor Income
generated by
by dndians
India
outside the
foreigner in
( ✗) India
(A)
GNP = GDP + G- A)
I
Met
factor Brome
from
abroad
GNP = GDP + Net Fenton income from Abroad
like we calculated GDP on market pain and factor
cost we can also calculate GNP on MP as well as

FC
GN Ppc -1 IDT Subsides
GNPMP
-

com-ept-ofNetincomeandGr
tears
osstsneomebur.my
production
activity
depreciation
there is Weare
of
i. e and the cost
of this
depreciation is added Gross income that
means
gross comprise of
income is income

through production and depreciation

in order to
. So
,

only through
•

calculate income
'

production exclusive of depreciation we

have to exclude
depreciation from gross income
Net = Gross -

Depreciation
Net Domestic Product (NDP) =
GDP -

Depreciation
Net National Product ( NNP ) =
GNP -

Depreciation
 GD Pnp = GD Pfc -1 Indirect tales -

Subsides

GNP = GDP + Net factor income from abroad

GN Pmp = GN Pfc-1 I D.T -
Subsides

GDP -

Depreciation = NDP
GNP -
n
= NNP

NDPFct subsides
ND
Pmp ID T
-
-
=

NN NN Pfc + I. D T subsides
Pmp
-

=
-

NN Pfc is known as National Income as it

shows how much it costs

society of in terms

economic resound to
produce net output
 National Income
Measurement
-
of
For the purpose of calculation of national income
three methods -

① Value Added method

② Income method
③ Expenditure method
Valuettddedtkthod
production method
This method is also known as

In this method the contribution of each enterprise

the
generation of flow of good & services is
measured .

of enterprises changes in stock

Sales +
Value
of sales =

Gross Value Added

-
on Market price @ VAMP)
Gross value added measures the contribution
to the value of output of a
product during yeara .

obtained
It can

intermediate
be
by deducting the value of
consumption
Intermediate consolation
GV Amp Value
of output
-

=
Income method
-

This method national income at the

measures

phase of distribution and appears as income paid on

received individuals
by of the
country .

Expendituremethode
Under this method all expenditures made on
goals of
services is added to calculate national income

In India Value Added Method ( GVA ) and Expenditure

Method both are used N so C National Statistical
calculate national income Nso comes
Office) to .

under
Ministry
of Statistics and Programme
Implementation ( Mos PI)
Nominal&RealGDP_
GDP at present market price is known as
nominal GDP where as GDP at constant price
cat base Year) is known as Real GDP At present .

base
yeag
India is
using 2011-12 as a

Nominal GDP ✗ too

GDP Deflator =

Real GDP