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Vikas Kumar Singh Tomar

1. Gross National Product (G.N.P.):
Gross National Product is defined as the total market value of all final goods and services produced in a year. (Or any specified time period e.g. a quarter). We have to keep these things in mind:
1. It is the market value of everything that is produced by Nationals of a country both inside and outside the country’s territory.
2. To ascertain accurate changes in the total output gross national product is adjusted for price changes by comparing it to a base year
3. Everything in the point one means total goods and services. Final means that the value has to be counted only once and not twice. This means intermediate products are not counted. Only the products and services that are used for final consumption have to be counted. For example wheat is converted to flour. Floor is a good for final consumption, and the value of floor covers the value of the wheat as well. Flour may be further converted to biscuits and in this case biscuits cover the value of wheat and its conversion to flour as well. So various forms of most of the goods are purchased and sold several times. This is likely to subject such goods to double accounting – once in its semi-finished form, and again as the final good. In order to avoid this problem, gross national product includes only the market values of the final goods, and ignores the transactions of intermediate goods.

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(Hindi) All About National Income of India and with important MCQs: Bank PO and SSC CGL

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The sum total of value added in all the economic enterprises of a country is National Income. There are a variety of measurements of the National Income. The value added refers to the money value all the final goods and services produced in a country during the period of one Year.
The basic concepts in national income are
Gross Domestic Product (GDP)
Gross National Product (GNP)
Net Domestic Product (NDP)
Net National product at Factor Cost or National Income
Net Domestic product at market prices
Net Domestic product at Factor Cost
Income from Domestic Product accruing to Private Sector
Private Income
Personal Income
Personal Disposable Income

Definition and Introduction of National Income (in Hindi)

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well (in the United States, for example, the government releases an annualized GDP estimate for each quarter and also for an entire year).

GDP includes all private and public consumption, government outlays, investments, private inventories, paid-in construction costs and the foreign balance of trade (exports are added, imports are subtracted). Put simply, GDP is a broad measurement of a nation’s overall economic activity – the godfather of the indicator world.

All About GDP and Sectors of GDP (in Hindi)

Income is the most frequently used term in Economics. Income level is the most useful tool which is used to determine the standard of living of the people in a Country. Actual meaning of National income is monetary value of all final goods and services produced by the residents of a Country. To calculate net national product, depreciation of plant and machinery used in the production process is deducted.

National income is calculated for a particular period, normally a financial year (In India, financial year means April 1 to March 31 of next year). Net factor income from abroad is added to the domestic product to get the value of National Income.

National Income = C + I + G + (X – M)
Where,

C = Total consumption expenditure
I = Total investment expenditure
G = Total government expenditure
X – M = Export - Import

Different concepts of National Income

Gross Domestic Product (GDP)

Gross domestic product is the value of all final goods and services produced within the boundary of a nation during one year. In India one year means from 1st April to 31st March of the next year.
GDP calculation includes income of foreigners in a Country but excludes income of those people who are living outside of that country.

Net Domestic Product (NDP)

NDP is calculated by deducting the depreciation of plant and Machinery from GDP.

NDP = Gross Domestic Product - Depreciation
Gross National Product (GNP)

GNP is the value of all final goods and services produced by the residents of a country in a financial year (i.e., 1st April to 31st March of the next year in India).

While Calculating GNP, income of foreigners in a country is excluded but income of people who are living outside of that country is included. The value of GNP is calculated on the basis of GDP.

GNP = GDP + X - M
Where,

X = income of the people of a country who are living outside of the Country
M = income of the foreigners in a country

Net National Product (NNP)

Net National Product (NNP) in an economy is the GNP after deducting the loss due to depreciation.

NNP = GNP - Depreciation
NNP at Factor Cost:

It is the value of NNP when the value of goods and services is taken at the production cost.

NNP at Market Price:

It is the value of NNP at consumer cost.

NNP at market cost = NNP at factor cost + Indirect taxes – Subsidies

Concepts of GDP,NDP,GNP,NNP for National Income (in Hindi)

The most common tool to measure economic growth is GDP, which is basically sum total of goods and services produced in the country. There are several approaches of calculating GDP. In a nutshell, these are as follows:

Expenditure Approach

In this, GDP is equal to total spending on all final goods and services (consumption goods and services (C) + Gross Investments (I) + Government Purchases (G) + (Exports (X) – Imports (M))

GDP = C + I + G + (X-M)

Income Approach

In this, GDP is calculated by adding up the factor incomes to the factors of production in the society.

GDP = National Income (NY) + Indirect Business Taxes (IBT) + Capital Consumption Allowance and Depreciation (CCA) + Net Factor Payments to the rest of the world (NFP)
NY = Employee compensation + Corporate profits + Proprietor’s Income + Rental income + Net Interest
CCA = Igross + Inet (I= Investment)
NFP = Payments of factor income to the Rest Of the World minus the receipt of factor income from the rest of the world
GDP + NFP = GNP (GROSS NATIONAL PRODUCT)
Value added Approach: Gross value added (GVA) is defined as the value of output less the value of intermediate consumption. Value added represents the contribution of labour and capital to the production process.
How Economic Growth is measured in India?

Earlier Economic growth in India was measured as change in GDP at Factor Cost and the base year used for calculating the figures was 2004-05. From January, 2015, the MOPSI made two important changes in this:

First, the base year was changed from 2004-05 to 2011-12.
The GDP at Factor costwas replaced by Gross Value Added (GVA) at basic prices.
This changed the definition of GDP growth in the government accounts because now GDP growth refers to GDP at market prices, which growth in economy is measured in GVA at basic prices. The relation between GDP and GVA is as follows:

GDP = ΣGVA at basic prices + product taxes – product subsidies or
GDP = GVA + DITS
where DITS is the difference between indirect taxes and subsidies.

The above change was done as per Pronab Sen Committee recommendations.

Implications of using GVA instead of GDP for measuring economic growth

Key implications of this major overhaul are as follows:

While GDP gives a picture of whole economy, GVA gives pictures at enterprises, government and households levels. In other words, GDP is GVA of all enterprises, government and households.
Gross Value Added (GVA) broadly reflects the supply or production side of the economy.
The new method was also recommended by the United Nations System of National Accounts in 2008; and has made India’s figures comparable to other countries.
The changed let to higher GDP growth instantly but now, after two years, the realistic figures have started coming in.
Merits and limitations of measurement economic growth

The merits and limitations in measurement of economic growth are as follows:

Merits

GDP / GVA are considered to be important indicators to monitor economic growth trends and to a great extent help economic planners to understand economic welfare in quantitative terms.
They are useful as benchmarks for policy makers and as a component to measure overall human development.
GDP/GVA growth serves as one measure of development in both rich and poor countries.
Further, the data on per capita income help policy makers to design policy for removal of poverty and raising standard of people.
Limitations

The limitations of measuring economic growth are as follows:
Measuring economic growth in GDP or GVA gives only quantitative picture and does not reveal the qualitative aspects of the life of people. For example, high per capita income may not always have a well educated population or a satisfactory level of educational development.
Economic growth is single parameters to understand and analyze the overall improvement in lives of people of a country.
It does not count free goods or non-market goods and services, thus ignoring household activities and assigns zero values to activities such as domestic work, housekeeping work by women, care for children and elderly, cleaning, food preparation, etc. In this sense, it’s not gender neutral also and neglects women’s contribution to economic activities.
It ignores distribution of income and it ignores qualitative aspects of human life.
This apart, the events such as crime, pollution, natural disasters, depletion of natural resources, accidents and diseases are counted as positive transactions because they lead to increased spending. Thus, GDP figures would ignore the welfare loss resulting from these activities.

Methods for Calculating National Income {Production,Income,Expenditure Methods} (in Hindi)

FAST FACTS
The 1st Estimate of National Income was prepared by Dadabhai Naoroji for the year 1867-68 
The 1st Scientific Estimate was made by Prof V.K.R.V Rao for the year 1931-32 
After independence , recognizing the importance of estimate of national income and its various components , the government of india appointed the National Income Committee in 1949 , with P.C.Mahalanobis as the Chairman 
Following the report of this committee , the task of national income was entrusted to the Central Statistical Organisation (CSO) 
A. RELATING TO THE DOMESTIC PRODUCT –
Gross Domestic Product at Market Price = Market vaule of final outputs of goods and services produced within the countrie’s domestic economy in a period of One Year 
Net Domestic Product at Market Price = GDP – Depreciation 
J Net Domestic Product at Factor Cost = NDP (MP) – Indirect Taxes +Subsidies 
B. RELATING TO THE NATIONAL PRODUCT –
Gross National Product at Market Price = GDP (MP) + Net Factor Income from Abroad . 
Net National Product at Market Price = GNP (MP) – Depreciation 
Net National Product at Factor Cost or National Income = National Product (MP) – Indirect Taxes + Subsidies 
Per Capita Product or Income = National Income or Net National Product at Factor Cost / Population

Most Important Facts Related to National Income of India (in Hindi)

indian economy objective questions answers mcq are important in ssc, upsc, ibps and competitive examination and entrance tests. 
Most Important MCQ, National Income - MCQs with answers - Part 1

Most Important MCQ of National Income Part-1 (in Hindi)

indian economy objective questions answers mcq are important in ssc, upsc, ibps and competitive examination and entrance tests. 
Most Important MCQ, National Income - MCQs with answers - Part 2

Most Important MCQ of National Income Part-2 (in Hindi)

indian economy objective questions answers mcq are important in ssc, upsc, ibps and competitive examination and entrance tests. 
Most Important MCQ, National Income - MCQs with answers - Part 3

Most Important MCQ of National Income Part-3 (in Hindi)

indian economy objective questions answers mcq are important in ssc, upsc, ibps and competitive examination and entrance tests. 
Most Important MCQ, National Income - MCQs with answers - Part 4

Most Important MCQ of National Income Part-4 (in Hindi)

indian economy objective questions answers mcq are important in ssc, upsc, ibps and competitive examination and entrance tests. 
Most Important MCQ, National Income - MCQs with answers - Part 5

Most Important MCQ of National Income Part-5 (in Hindi)

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Definition and Introduction of National Income (in Hindi)

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All About GDP and Sectors of GDP (in Hindi)

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Concepts of GDP,NDP,GNP,NNP for National Income (in Hindi)

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Methods for Calculating National Income {Production,Income,Expenditure Methods} (in Hindi)

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Most Important Facts Related to National Income of India (in Hindi)

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Most Important MCQ of National Income Part-1 (in Hindi)

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Most Important MCQ of National Income Part-2 (in Hindi)

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Most Important MCQ of National Income Part-3 (in Hindi)

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Most Important MCQ of National Income Part-4 (in Hindi)

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Most Important MCQ of National Income Part-5 (in Hindi)