National Income means the total money value of all final goods and services produced in a country during a particular period of time.

(i) Nominal income is expressed in terms of a general price level of a particular year. In other words, real income is the buying power of nominal income.
(ii) The real income is derived as follows
National Income at constant price = National Income at current price \(\div\) P₁/P₀

(i) NDP = GDP - Depreciation.
(ii) NNP = GNP - Depreciation.
(iii) The difference between NDP and NNP is the net factor income from abroad.
(iv) In NDP it is excluded but in NNP it is included.

\(\mathrm{GNP}=\mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}-\mathrm{M})+(\mathrm{R}-\mathrm{P})\) or \(\mathrm{GNP}_{\mathrm{MP}}=\mathrm{GDP}_{\mathrm{MP}}\) + Net Factor income from Abroad.

"The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend". - Alfred Marshall

(i) Accurate and reliable data are not adequate as farm output in the subsistence sector is not completely informed.
(ii) In animal husbandry there are no authentic production data available.
(iii) Different languages, customs, etc., also create problems in computing estimates.
(iv) People in India are indifferent to the official inquiries. They are in most cases non-cooperative also.
(v) Most of the statistical staff are untrained and inefficient.
(vi) Therefore, national income estimates in our country are not very accurate or adequate.

(i) Transfer payments
(ii) Difficulties in assessing depreciation allowance.
(iii) Unpaid Services
(iv) Income from illegal activities.
(v) Production for self consumption and changing price.
(vi) Capital Gains
(vii) Statistical problems

(i) It is the total of income payment made to factors of production.
(ii) From the money value of NNP at market price, we deduct indirect tax and add subsidy.
(iii) \(\mathrm{NNP}_{\mathrm{FC}}=\mathrm{NNP}_{\mathrm{MP}}-\) Indirect taxes + Subsidies

S.No	Personal Income	Disposable Income
1	It is the total income received by the individual before payment of direct taxes in a year	It is the individual's income after the payment of income tax
2		Disposable income = Personal income - Direct tax

1. The average income of a person of a country in a particular year is called Per Capita Income.
2. Per capita income is got by dividing national income by population.
Per capita income =\(\cfrac { National\ income }{ Population } \)

Product Method:
(i) Product method measures the output of the country. It is also called inventory method.
(ii) It is obtained for the entire economy during a year.
(iii) The value obtained is actually the GNP at market prices.
(iv) Care must be taken to avoid double counting.
(v) The value of the final product is derived by the summation of all the values added in the productive process.
(vi) To avoid double counting either the value of the final output should be taken in to the estimate of GNP.
(vii) In India the gross value of the farm output is obtained as follows.
(1) The output of each crop is measured by multiplying the area shown by the average yield per hectare.
(2) The total output of each commodity is valued at market prices.
(3) The net value of the agriculture output is measured by making deductions for the cost of seed, manures and fertilisers etc.,
(4) Net value of the output in these sectors is derived by making deductions for cost of materials used in the process of production and depreciation allowances etc., from gross value of output,
(5) For example, value of cotton enters value of yarn as cost and value of yarn in cloth and that of cloth in garments at every stage value added only should be calculated.

(i) Income by Income Method. Income method approaches National Income from the distribution side.
(ii) National income is calculated by adding up all the incomes generated in the course of producing national product.
(iii) Factor incomes are grouped under labour income, capital income and mixed income.
(iv) national income is calculated as domestic factor income plus net factor incomes from abroad. In short,
Y = w + r + i + π + (R-P)
w = wages
r = rent
i = interest
π = profits
R = Exports
P = Imports
(v) This method is adopted for estimating the contributions of the remaining sector, viz.
(vi) Data on income from abroad (the rest of) the world sector or foreign sector are obtained from the account of the balance of payment of the country.
Items no to be included:
(1) Transfer payments are not to be included in estimation of national income.
(2) The receipts from the sale of second hand goods should not be treated as part of national income.
Item to be included:
(1) Imputed value of rent for self occupied house or offices is to be included.
(2) Imputed value of services provided by owners of production unit (family labour) is to be included.

(i) National income is of great importance for the economy of a country.
(ii) National income helps us to know the relative importance and contribution of each sector. We could find how income is produced, how it is distributed, how much is spent, saved or taxed.
(iii) National income data is used to formulate monetary policy, fiscal policy and other policies.
(iv) Data regarding gross income, output, saving and consumption is uscd in economic planning.
(v) National income data is used to build economic models in short run and long run.
(vi) It is used to make international comparison, inter regional comparison and inter temporal comparison of growth of the economy during different periods.
(vii) If income is equally distributed, the per capita income will reflect the economic welfare of the country.