Who will estimate the National income of India and how ?

The Central Statistics Office under the Ministry of Statistics and Programme Implementation is responsible for measuring National Income and other related macroeconomic aggregates.

National income is the total value of final goods and services produced by the normal residents during an accounting year, after adjusting depreciation.

The CSO employs the Income method, Production method and Expenditure method to calculate the National Income.

Income Method

Estimated by adding all the factors of production (rent, wages, interest, profit) and the mixed-income of self-employed.

This is the ‘domestic’ income, related to the production within the borders of the country.

Production method

Estimated by adding the value added by all the firms.

Value-added = Value of Output – Value of (non-factor) inputs

1. This gives GDP at Market Price (MP) – because it includes depreciation (therefore ‘gross’) and taxes (therefore ‘market price’)

2. To reach National Income (that is, NNP at FC)

Add Net Factor Income from Abroad: GNP at MP = GDP at MP + NFIA

Subtract Depreciation: NNP at MP = GNP at MP – Dep

Subtract Net Indirect Taxes: NNP at FC = NNP at MP – NIT

Expenditure Method

The expenditure method to measure national income can be understood by the equation given below:

Y = C + I + G + (X-M),

where Y = GDP at MP, C = Private Sector’s Expenditure on final consumer goods, G = Govt’s expenditure on final consumer goods, I = Investment or Capital Formation, X = Exports, I = Imports, X-M = Net Exports