1. The product method followed in underdeveloped countries, is less reliable because the margin of error is large.
2. Double counting should be avoided.
3. Value af output used for self consumption should be counted.
4. Sale and purchase of second hand durable goods should not be counted.

1. To measure income from all sources including income that results from the replacement of existing plant and equipment.
2. Since national income includes corporate profit after depreciation it must be added in to reconcile it in the GDP accounts with the expenditure approach.
3. The expenditure approach does not leave depreciation out. It is included in gross investment

i. National income is also being measured by the social accounting method.
ii. Under this method, the transactions among various sectors such as firms, households, government, etc., are recorded and their interrelationships traced.
iii. The social accounting framework is useful for economists as well as policy makers,
iv. Because it represents the major economic flows and statistical relationships among various sectors of the economic system.
v. It becomes possible to forecast the trends of economy more accurately.
vi. Social Accounting and Sector Under this method, the economy is divided into several sectors. A sector is a group of individuals or institutions having common interrelated economic
vii. The economy is divided into the following sectors (i) Firms, (ii) Households, (iii) Government, (iv) Rest of the world and (v) Capital sector.

1. Imputed value of rent for self occupied houses or offices is to be included.
2. Imputed value of services provided by owners of production units (family labour) is to be included.

1. Transfer payments are not to be included in estimation of national income as these payments are not received for any services provided in the current year such as pension, social insurance etc.
2. The receipts from the sale of second hand goods should not be treated as part of national income as they do not create new flow of goods or services in the current year.
3. Windfall gains such as lotteries are also not to be included as they do not represent receipts from any current productive activity.
4. Corporate profit tax should not be separately included as it has been already included as a part of company profit.

1. The enterprises are classified into various industrial groups.
2. Factor incomes are grouped under labour income, capital income and mixed income.
i) Labour income - Wages and salaries, fringe benefits, employer’s contribution to social security.
ii) Capital income – Profit, interest, dividend and royalty
iii) Mixed income – Farming, sole proprietorship and other professions.
3. National income is calculated as domestic factor income plus net factor incomes from abroad.

(i) Total production of 64 agriculture commodities is estimated. The output of each crop is measured by multiplying the area sown by the average yield per hectare.
(ii) The total output of each commodity is valued at market prices.
(iii) The aggregate value of total output of these 64 commodities is taken to measure the gross value of agricultural output.
(iv) The net value of the agricultural output is measured by making deductions for the cost of seed, manures and fertilisers, market charges, repairs and depreciation from the gross value

(1) Value of final consumer goods and services produced in a year to satisfy the immediate wants of the people which is referred to as consumption (C);
(2) Gross private domestic investment in capital goods consisting of fixed capital formation, residential construction and inventories of finished and unfinished goods which is called as gross investment (I);
(3) Goods and services produced or purchased by the government which is denoted by (G) ; and
(4) Net exports of goods and services, i.e., the difference between value of exports and imports of goods and services, known as (X - M)
(5) GNP at market prices means the gross value of final goods and services produced annually in a country plus net factor income from abroad (C + I + G + (X - M) + (R - P)).

The followings are some of the National Income Identities:
NNP = GNP - Depreciation
NNI = NNP - Indirect taxes
PI = NNI - Retained earnings, corporate taxes and interest on public debt
PDI = PI - Personal taxes
Where,
GNP = Gross National Product
NNP = Net National Product
NNI = Net National Income
PI = Personal Income
PDI = Personal Disposable Income

(i) In the output or product method, the measures of GDP are calculated by adding the total value of the output (of goods and services) produced by all activities during any time period, such as a year.
(ii) The major challenge of this method is the problem of double counting.

(i) Per Capita income (or) output per person is an indicator to show the living standards of people in a country.
(ii) If real PCI increases.
(iii) It is considered to be an improvement in the overall living standard of people.
(iv) PCI is arrived at by dividing the GDP by the size of population.
(v) It is also arrived by making some adjustment with GDP
(vi) \(PCI=\frac { GDP }{ Total\ number\ of\ people\ in\ a\ country } \) (or)\(PCI=\frac { National\ Income }{ Total\ Population } \)

(i) The Depreciation cost (or) capital consumption refers to all those expenditure undertaken by the producers to replace the worn out parts of the capital goods like Machinery, tools, equipments and buildings used up in the production of goods and services.
(ii) These expenditure should be excluded from the Gross output

(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