National Income – Concept, Types and Measurement (Managerial Economics)

Posted on Jun 5 2020 - 4:46pm by Preeti

Measurement of National Income in India

In India, a systematic measurement of national income was first attempted in 1949. Earlier, many attempts were made by some individuals and institutions. The earliest estimate of India’s national income was made by Dadabhai Naoroji in 1867-68. Since then many attempts were made, mostly by the economists and the government authorities, to estimate India’s national income. These estimate differ in coverage concepts and methodology and are not comparable. Besides earlier estimate were mostly for one year, only some estimates covered a period of 3-4 years. It was therefore not possible to construct a consistent series of national income and assess the performance of the economy over a period of time.

In 1949, A National Income Committee (NIC) was appointed with PC Mahalanobis as its Chairman, and D.R. Gadgil and V.K. R.V. Rao as members. The NIC not only  highlighted the limitations of the statistical system of that time but also suggested ways and means to improve data collection systems. On the recommendation of the Committee, the Directorate of National ample Survey was set up to collect additional data required for estimating national income. Besides the NIC estimates the country’s national income for the period form 1948-49 to 1950-52. In its estimates, the NIC also provided the methodology for estimating national income, which was followed till 1967, In 1967, the task of estimating national income was given to the Central Statistical  Organisation (CSO). Till 1967, the CSO had followed the methodology laid down by the NIC. Thereafter, the CSO adopted a relatively improved methodology and procedure which had become possible due to increased availability of dat. The improvements pertain mainly to the industrial classification of the activities. The CSO publishes its estimate in its publications, Estimates of National Income.

Currently, output and income methods are used by the CSO to estimate the national income of the country. The output method is used for agriculture and manufacturing sectors, i.e.., the commodity producing sectors. For these sectors, the value added, method is adopted. Income method is used for the service sectors including trade, commerce, transport and government services. r the service sectors including trade, commerce, transport and government services. In its conventional series of national income statistics from 1950-51 to 1966-67, the CSO had categorized the income in, 13 sectors. But, in the revised series, it had adopted the following 15 break-ups of the national economy for estimating the national income;
(i) Agriculture;
(ii) Forestry and logging;
(iii) Fishing;
(iv) Mining and quarrying;
(v) Large-scale manufacturing;
(vi) Small-scale manufacturing;
(vii) Construction;
(viii) Electricity, gas and water supply;
(ix) Transport and communication;
(x) Real estate and dwellings;
(xi) Public Administration and Defence;
(xii) Other services: and
(xiii) External transactions.
The national income is estimated at both constant and current prices.

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