96490377 national income mba ppt

7/22/2019 96490377 National Income MBA PPT

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ECONOMICS

ENVIRONMENT

NATIONAL INCOME

ACCOUNTING


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NATIONAL INCOME

LEARNING OBJECTIVES

What is national income?

Importance o national income Concepts o National income National income estimates in

In!ia" Meas#rin$ National incomeTren!s in National income

%iic#lties in meas#rin$ national


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NATIONAL INCOME

What is National Income?

National Income is the money valueof

all goods and services produced in a

country during a year"

J"M &e'nes


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NATIONAL INCOME

While family income reflects the economic

osition of household! national incomesho"s

the economic position of a Nation#

The $asic o$%ective of an economy is toachieve

economic rogress#

National income & help assess ' comparethe

progress achieved $y a country over a


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IM(ORTANCE O) NATIONAL INCOME

*" With national income+ ,e can chart themo-emento co#ntr' rom !epression toprosperit'"

." The economic ,elareo comm#nit' can /emeas#re! ,ith national income"

0" It helps in in!in$ stan!ar! o li-in$"

1" It helps in !eterminin$ the pace o economic!e-elopmento the econom'"


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IM(ORTANCE O) NATIONAL INCOME

2" It helps to #n!erstan! the contri/#tionma!e /' !ierentsectorsto the

econom'"

3" It helps in !e-elopment plannin$o aco#ntr'"

4" It pro-i!es inormationo the sa-in$s+cons#mptionan! in-estment str#ct#reo the econom'"


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%I))ERENT CONCE(TS O) NATIONAL INCOME

There are i-e concepts o NationalIncome5

*" Gross National (ro!#ct

." Net National (ro!#ct

0" National Income

1" (ersonal Income2" %isposal Income


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GN(6 6!eine! as the total mar7et -al#e o inal $oo!san! ser-ices pro!#ce! in a 'ear"

The mone' -al#e o onl' inal $oo!s to /e consi!ere!not the -al#e o interme!iate $oo!s"

G%(6 a$$re$ate -al#es o o#tp#t o $oo!s an! ser-icespro!#ce! in a co#ntr' ,itho#t a!!in$ net actorincomes recei-e! rom a/roa!"

G%( 8 GN( 6 Income recei-e! rom a/roa!"

NN( 9 means the mar7et -al#e o all inal $oo!s an!ser-ices ater pro-i!in$ or !epreciations"


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NN( 9 means the mar7et -al#e o all inal$oo!s an! ser-ices pro!#ce! in a 'ear isconsi!ere!"

It means that in the pro!#ction o $oo!s :ser-ices + there is the cons#mption o capital$oo!s s#ch as e;#ipment : machiner'"

To $et NN( the -al#e o !epreciation has to /ere!#ce! rom GN("


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0" NI at actor cost9 sho,s ho, m#ch it costs tosociet' in terms o economic reso#rces ortheir contri/#tion o lan!+ la/o#r + capital an!entreprene#rial a/ilit' ,hich $o into the 'ear=snet pro!#ction"

NI at actor cost8NI at mar7et prices 9 ta>es6!epreciation s#/si!ies

NI at mar7et price8 NI at actor cost ta>es 9s#/si!ies !epreciation


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E>5 A motor car costs . la7hs ,hich incl#!ese>cise !#t' o Rs".@+@@@" Mar7et price o a car

is . la7hs While the actors en$a$e! in pro!#ction $et

Rs"*"@ la7hs"

Th#s the -al#e o national income at actor,o#l! /e

E;#al to the mar7et prices min#s the in!irectta>es pl#s s#/si!ies"


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NATIONAL INCOME 6CONCE(TS

(ERSONAL INCOME 5 (I is that income act#all'recei-e! /'

the in!i-i!#als or ho#sehol!s in a co#ntr' !#rin$ the

'ear+

rom all so#rces"

%IS(OSABLE INCOME5 %I is that part o income ,hich

is let/ehin! ater the pa'ment o !irect ta>es is calle!

%isposa/le

(ersonal Income"


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NATIONAL INCOME 6CONCE(TS

(ERCA(ITA INCOME 5in!e> o chan$es in the stan!ar!o

li-in$ o the people o a co#ntr'"

The percapita income in!icates the economicpro$ress in

terms o $oo!s an! ser-ices a-aila/le per hea! o the

(op#lation"

(I8NIpop#lation


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ESTIMATION O) NATIONAL INCOME

The ,or7 on National income in In!ia ha! starte! in the*Dthcent#r'+ /' %a!a/hai Naoroi"

A n#m/er o research ha! ta7en place since *D@@"

VERV Rao ma!e the irst national income estimate on ascientiic ,a' or the 'ear *D0*60."

Go-ernment o In!ia also prepare! the estimates or the'ear *D161D"

*D1D6 The national income committee ,as orme!"

The Central Statistical or$aniFation CSOH ,as entr#ste!,ith the ,or7 o estimation an! the irst oicial paperWhite (aper ,as release! in the 'ear *D23" No, it is7no,s as national acco#nts statistics"


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NATIONAL INCOME ESTIMATION

NI estimation can /e st#!ie! #n!er t,o cate$ories5

*" (re6in!epen!ence perio! estimation." (ost in!epen!ence perio! estimation

(re6in!epen!ence perio! estimation5 se-eral estimates,ere

prepare! in the British perio!"

AH %a!a/hai Naoroi+Wa!ia : Joshi 5 estimate! the -al#e oo#tp#to the a$ric#lt#ral sector an! then a!!e! certainpercenta$e as

the income to the non6a$ric#lt#re sector" This ,as!e-oi! o an'

scientiic /asis


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BH %R"VERV Rao ma!e #se o a com/ination cens#s o o#tp#t

an!census of income method" cl#!e!"


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CH JR hic7s+ M M#7heree : SL Ghosh5 calc#late! therates o $ro,th per capita income or the perio! 5

TIME (ERIO% RATE O) GROWTpen!it#re inc#rre! or $oo!s an! ser-ices"

Go-ernment as

,ell as in!i-i!#als spen! mone' or cons#mption an!pro!#ction p#rposes"

The s#m total o e>pen!it#re inc#rre! in a co#ntr'

!#rin$ a'ear ,ill /e e;#al to national income"

GNI8In!i-i!#al e>pen!it#re Go-ernmentE>pen!it#re


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Meas#rement o nationalincome 9E>pen!it#re metho!

E>pen!it#re approach 9 ollo,in$ cate$ories o e>pen!it#re area!!e! in

or!er to in! o#t the GN(

aH (ersonal Cons#mption e>pen!it#re 5 on !#ra/le $oo!s : non 9

!#ra/le $oo!s pro!#ce! in a co#ntr' !#rin$ a 'ear"

E>pen!it#re on ser-ices+ s#ch as transport + e!#cation an!me!ical"

E>pen!it#re on ho#sehol!"

/H Go-ernment p#rchase o $oo!s an! ser-ices 5 $oo!s s#ch aspaper+ stationer'+ machiner'+ e;#ipment etc"+

Ser-ices5 Go-t" inc#rs e>pen!it#re on pa'ment o salaries t

Militar' personnel+ police an! a!ministration"


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Meas#rement o nationalincome 9Income metho!

E>pen!it#re ma!e /' the people in a co#ntr' on $oo!s an! ser-ices

pro!#ce! in a co#ntr' !#rin$ a 'ear /ecomes the income o the-ario#s

)actors"

The actor income is $ro#pe! into ollo,in$ cate$ories5

Wa$es an! salaries

Income o Compan' /#siness Rental incomes o persons

Corporate proits

Income rom net interest


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SIGNI)ICANCE O) NATIONALINCOME ESTIMATES

"1.The national income of a country reveals the picture of the

economy.

Indicates rise in standard of living reveals the improvement of

economic welfare

2. I reveals overall production in each year reveal real growthThe economy! if growth is stagnant measures can "e adopted toincrease I

#. I shows the contri"ution made "y different sectors of the economy.

$. I estimates throws light on the three maor aspects of the economynamely & consumption& savings& and investment.

5. I figures used to measure the economic welfare in different countries


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SIGNI)ICANCE O) NATIONALINCOME ESTIMATES

"

'.(rom the I estimates& we can also see the partplayed "y the government in the nationaleconomy.

).o& development planning is possi"le withoutcomplete study of national income estimates.

*.I estimates are very useful in formulating plansfor the development of agriculture& Industry& andinfrastructure etc.&

%I))ICKLTIES IN T


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%I))ICKLTIES IN T


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%I))ICKLTIES IN Tcl#!e!rom NI i$#res an! lea!s to the #n!er estimationo the NI"

3" In!i-i!#als !o not 7eep correct acco#nt o their

cons#mption"

4" Illiterac' an! i$norance"

" Lac7 o proper criteria or meas#rin$ the -al#e o

%I))ICKLTIES IN T


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%I))ICKLTIES IN T


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TREN%S IN NATIONAL INCOME

*" Tren!s in Net National (ro!#ct

." Tren!s in !istri/#tion o NI /' in!#strial ori$in

0" Tren!s in the share o (#/lic sector1" Kr/an : R#ral /rea76#p

2" Share o or$aniFe! : #nor$anise! sector inN%(

I + changes in the structure of national product analy,ed overthe -ast 50 years



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*"Tren!s in Net National (ro!#ct5

The increase in the pro!#ction o $oo!s : ser-ices in!icatesthe

$ro,th 9more $oo!s : ser-ices are a-aila/le to people :alsoin!e> o total pro!#cti-e eort o the comm#nit'

."Tren!s in !istri/#tion o NI /' in!#strial ori$in

*D2@62* 5 A$ric#lt#re contri/#te! to 1"3 o G%( : ell to.1". in *DD46D

Share o ishin$ in G%( remaine! constant thro#$ho#t thei-e

%eca!es Share o orester' sho,s contin#es !ecline rom 2to



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Share o secon!ar' sector6 incl#!e minin$ + mr$+constr#ction+

electricit'+ $as : ,ater s#ppl' has sho,n stea!' increase

rom*3"* o G%( to .4"

Share o tertiar' sector9 incl#!es tra!e : transport+comm#nications

/an7in$+ ins#rance+ real estate am! comm#nit' : personalser-ices

impro-e! rom ."2 to 13"3



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0"Tren!s in the share o (#/lic sector5share othe

$o-t"sector ,as 4"3 an! rose to .0"0 6 !irectres#lt

o e>pansion o economic acti-ities"

1"Kr/an : R#ral /rea76#p5 Kr/an r#ral !isparit'ratio in

percapita N%( ,as ."12 in *D4@ 64* : it !ecline!to ."0D



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2"Share o or$aniFe! : #nor$anise! sector in N%(

Or$anise! enterprises6 either re$istere! or come #n!erthe p#r-ie, o an' o the acts an! maintain ann#alacco#nts an! /alance sheets"

Knor$anise! enterprises incl#!e all #nincoraporate!enterprises an! ho#sehol! in!#stries ,hich are re$#late!/' an' one o the acts : !o not maintain ann#al acco#nts

or /alance sheets"

Share o Or$anise! sector has risenShare o #nor$nise! sector has allen

IM(ORTANT TREN%S IN NATIONAL


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NATIONAL INCOME

The rate o $ro,th o G%( since *D2@ aro#n! 1"2 "

*D2@ 9 *D@ 5 Gro,th rate ho-ere! aro#n! a lo, o 0"2

Gro,th rate remain st#c7 at the lo, le-el or lon$"

*D@6* to *DD* 6D.5Brea7 rom this tren! came in the *D@=s

,ith the $ro,th rate $oin$ a/o-e 2"

*DD. 6D0 to .@@*6@. 5 $ro,th rate #rther accelerate! to 3"2

Thereater the rise ,as rapi! an! lar$e "

IM(ORTANT TREN%S IN NATIONAL


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NATIONAL INCOME

As or the sectoral contri/#tions to the G%( all the threesectors

ha-e a!!e! to the inal o#tcome


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CIRCKLAR )LOW O)INCOME

(resent !a' ,orl!6 pro!#ction is carrie! mainl' or thep#rpose o

sale in the mar7et"

To pro!#ce ,i!e -ariet' o $oo!s the /#siness irmscom/ine

-ario#s actors o pro!#ction an! tr' to sell those $oo!s inthe

mar7et"

In the econom'+ the sales ma!e /' the /#siness irm$enerate lo,

o mone' income ,hich are #se! to ma7e pa'ments to theactors


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CIRCKLAR )LOW O)INCOME

In a modern capitalist economy the process of productionand

exchange generate two kinds of circular flows:

House holds supply various factors of production demanded by

Business firms.

1. Business firms pay rewards in cash for the factorservices supplied by the house holds.

ouseholds (irms

Consumption expenditure (money flow)

-ayment to factor service/money flow


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CIRCKLAR )LOW O) INCOME

Consumption expenditure (money flow)

-ayment to factor service/money flow

In an economy -roduction processes + marets generates

two types of flows

1. 3 supply of factor services "y the household to theproduction process of firms.

2. 3fter production goods + services are sending to the

maret "y firms for selling to house hold.

4ome types of flow which is circular in a nature taes place!called real flow.

3nother type of flow called! money flow! production firmspay in cash for goods + services they get from house holds.

oney so received "y will "e spent on re6uired goods +services produced "y firms.


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Circ#lar lo, o income

In e-er' econom'+ irrespecti-e o siFe opop#lation+

this lo, ore-er"

Circ#lar lo, o income in t,o sector mo!el actsas a

/ase or meas#rin$ national income an!e>pen!it#re"


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SAVINGS

The income recei-e! /' ho#sehol!s ,ill ha-e t,ochannels5

*" Cons#mption E>pen!it#re ." Sa-in$s

8CS In a circ#lar lo, t,o sit#ations can occ#r

*" With!ra,l o mone' o#t o incomelea7a$eH ." Intro!#ction o income into circ#lar lo,inectionH

Lea7a$e occ#rs /eca#se sa-in$s o the ho#sehol!s +ta>pai! to

$o-ernment+ pa'ments or imports" = 9


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Cons#mption : Sa-in$s relationship

Relationship /et,een sa-in$s : cons#mption 9implies that e-er'


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INVESTMENTSWhat is In-estment?In-estment is a term reerre! to capital e>pen!it#re ma!e /'

irms"

This e>pen!it#re ,ill /e in the orm o capital $oo!s li7e lan!+/#il!in$+ plant

machiner' etc"+ ,itho#t ,hich irm cannot pro!#ce $oo!s orho#sehol!s"

In-estment comes rom t,o so#rces -iF"+ /orro,in$s : retaine!earnin$s"

In-estment ,ill /e an a!!ition to circ#lar lo, o income"

S : I in an' econom' nee! not /e necessaril' e;#al as in-estment

ta7es place /' irms an! sa-in$s /' the people"SI or IS

Normall' in-estment ,ill /e more than sa-in$s" There ,ill /elea7a$e in

circ#lar lo, o income !#e to sa-in$s"

This lea7a e ,ill /e ne#traliFe! / in ection in the in-estment"


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96490377 national income mba ppt

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