National Income & GDP

The National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation (MoSPI), is responsible for calculating India's National Income.

National Income (NNP at factor cost) = NNP at market price - Indirect Taxes + Subsidies.

Transfer payments like old-age pensions, unemployment allowances, and scholarships are excluded as they are not payments for current productive services.

Dadabhai Naoroji made the first attempt to calculate India's National Income in 1867-68, popularly known as the 'Drain of Wealth' theory.

Depreciation refers to the consumption of fixed capital (wear and tear) that occurs during the production process, and it is subtracted from GNP to arrive at NNP.

Nominal GDP is the value of all final goods and services produced at current market prices, whereas Real GDP is calculated at constant (base year) prices.

The Tertiary (Service) sector accounts for more than 50% of India's GVA, making it the largest contributor to the economy.

GNP = GDP + NFIA. If NFIA is negative, it means outflows of income exceed inflows, making GNP smaller than GDP.

Using a base year allows economists to remove the effect of price changes (inflation) to measure the actual increase in the volume of production.

GDP only accounts for goods and services sold in the market; unpaid household services are excluded as they do not have a market transaction value.

Value Added = Value of Output - Value of Intermediate Consumption. This method prevents double counting of goods.

Per Capita Income is calculated as the National Income divided by the total population, representing the average income earned per person.

The National Income Committee was set up in 1949 under the chairmanship of P.C. Mahalanobis to lay the foundation for national accounting in India.

Interest on national debt is a transfer payment and is not included in the expenditure method of calculating GDP.

Gross National Product (GNP) accounts for income earned by residents abroad minus income earned by non-residents within the domestic territory.

Gross Domestic Product (GDP) is defined as the total value of goods and services produced within the domestic territory of a country, regardless of who produces it.

Per Capita Income = National Income / Population. A high total GDP divided by a very large population results in a low average income.

Intermediate goods are those used as inputs in the production of other goods. Steel is an input for cars, whereas the other options are final goods.

The parallel economy consists of unrecorded economic activities (black money) that are not reflected in official GDP estimates.

The Income Method calculates national income by summing all factor incomes generated during the production process: wages, rent, interest, and profits.

GNP is equal to GDP plus Net Factor Income from Abroad (NFIA), which represents the income earned by residents from overseas investments minus income earned by non-residents domestically.

The GDP Deflator is a measure of price inflation calculated by dividing Nominal GDP by Real GDP and multiplying by 100.

Intermediate goods are goods used in the production process of other goods; including them would count their value multiple times.

Old-age pensions are considered transfer payments, not factor incomes, as they do not correspond to any current productive activity.

Per Capita Net National Income is generally considered the best indicator of the average material welfare or standard of living of the population.

Per Capita Income = National Income / Population. If the numerator grows slower than the denominator, the overall ratio decreases.

National Income at Factor Cost is calculated by subtracting net indirect taxes (indirect taxes minus subsidies) from National Income at market prices.

Private final consumption expenditure (C) is typically the largest component of GDP in most economies.

Green GDP is an indicator of economic growth that accounts for the environmental costs of production, such as pollution and depletion of natural resources.

While Dadabhai Naoroji made the first pioneering estimate, V.K.R.V. Rao provided the first 'scientific' estimate of India's national income.

Net National Product at factor cost is the standard definition of National Income.

Investment in national income accounting refers to the addition to the stock of physical capital, such as machinery, buildings, or infrastructure.

Disposable Income is the income actually available to individuals for consumption after paying direct taxes.

The manufacturing sector, which transforms raw materials into finished goods, is classified as the secondary sector.

GDP at Market Price = GDP at Factor Cost + Indirect Taxes - Subsidies. An increase in subsidies reduces the Market Price.

GDP measures total output but does not reflect how that income is distributed among the population, thus ignoring inequality.

As of the current static data used in examinations, 2011-12 remains the base year for the calculation of GDP at constant prices.

Domestic income (NDP at factor cost) is the aggregate of factor incomes earned within the domestic territory of a country.

The three standard methods are the Product (Value Added) Method, Expenditure Method, and Income Method.

NFIA = Factor income earned from abroad minus factor income paid to abroad. A positive value implies the former is larger.

GNP accounts for production by a country's residents anywhere in the world, whereas GDP is limited to production within the geographic boundaries.

A normal resident is an individual or institution whose center of economic interest lies in the economic territory of the country for a period of one year or more.

NNP is obtained by subtracting depreciation from GNP. Depreciation represents the wear and tear of capital goods used in the production process.

The Primary sector (Agriculture and allied activities) historically employs the largest share of India's workforce, even though its contribution to GVA is significantly lower than the Services sector.

The expenditure approach formula is GDP = C + I + G + (X - M), where X-M is Net Exports.

Real GDP is adjusted for inflation by using a fixed base year, whereas Nominal GDP is calculated using the prices prevailing in the current year.

In the expenditure method, Net Exports (Exports minus Imports) is a component of GDP. If imports exceed exports, it results in a negative net export value, which lowers the total GDP.

Intermediate goods are those used in the production of other goods. Steel used to make a car is an intermediate good, whereas the finished car is the final good.

The GDP Deflator is defined as the ratio of Nominal GDP to Real GDP, providing a comprehensive measure of inflation in the entire economy.

Personal Disposable Income is the income available to individuals after deducting personal taxes and non-tax payments from the Personal Income.