National Income of India

According to National Income Committee (1945), "A national income estimates measures and volume of commodities and services turned out during a given period counted without duplication." Thus national income measures the net value of goods and services produced in a country during a year and it also includes net earned foreign income. In other words, a total of national income measures the flow of goods and services in economy. National income is a flow not a stock. As contrasted with national wealth which measures the stock of commodities held by nationals of a country at a point of time, national income measures the productivity power of an economy in a given period to turn out goods and services to final consumption.

In India, National income estimates are related with the financial year (April 1 - March 31).

Concept of National Income

The various concepts of national income are as follows -

1. Gross National Product (GNP) -  Gross National Product refers to the money value of total output or production of the final goods and services produced by the nationals of a country during a given period of time, generally a year.
   As we include all final goods and services, produced by nationals of the country during a year, in the calculations of GNP, we include money value of goods and services produced by nationals outside of country in calculating GNP. Hence, income produced and received by nationals of a country within the boundaries of foreign countries should be added in Gross Domestic Product (GDP) of the country. Similarly income received by foreign nationals within the boundary of country should be excluded from GDP.
   In equation form:
   GNP = GDP + X - M
   where,
   X = Income earned and received by the nationals within the boundaries of foreign country.
   M= Income received by the foreign nationals within the country.
   If X = M then GDP = GNP
   Similarly in closed economy X = M = 0 then also GDP = GNP
   Gross Domestic Product is the total money value of all final goods and services within the geographical boundaries of the country during a given period of time. As a conclusion it must be understood, while domestic product emphasises the total output which is raised within the geographical boundaries of the country, national product focuses attention not only on goods and services produced out side the boundaries of nation. Besides, any part of GDP which is produced by nationals of a country should be included in GNP.
2. Net National Product - NNP is obtained by subtracting depreciation value (i.e. capital stock consumption) from GNP.
   In equation form: NNP = GNP - Depreciation
3. National Income - GNP, explained above, is based on market prices of produced goods which includes indirect taxes and subsidies. NNP can be calculated in two ways -
   i) at market prices of goods and services
   ii) at factor cost
   When NNP is obtained at factor cost, it is known as National Income. National Income is calculated by subtracting net indirect taxes (i.e. total indirect tax-subsidy) from NNP at market prices. The obtained value is known as NNP at factor cost or National Income.
   In equation form: 
   National Income or NNP at factor cost = NNP at Market Price - (Indirect Taxes - Subsidy)
   National Income = NNPMP - Indirect Tax + Subsidy
4. Personal Income - Personal income is that income which is actually obtained by subtracting corporate taxes and payments made for social securities provisions from national income and adding to it government transfer payment and net interest paid by the government.
   In equation form:
   Personal Income = National Income - undistributed profit of corporation - payment for social security provisions - corporate taxes + Government transfer payments + Business transfer payments + Net interest paid by Government
   It should always be kept in mind that National Income is a Flow Concept
5. Disposable Personal Income - When personal direct taxes are subtracted from personal income, the obtained value is called disposable personal income (DPI)
   In equation form: DPI = Personal Income - Direct Taxes