National Income and Its Calculation Methods

Study Notes

National Income

Definition: National Income is the total value of all final goods and services produced within a country's border during a year.
Calculation Methods:
1. Value Added Method: Calculates the value added at each stage of production.
2. Expenditure Method: Calculates the total expenditure on final goods and services.
3. Income Method: Calculates the total income earned by factors of production.
Components:
- Gross National Product (GNP)
- Net National Product (NNP)
- Net Domestic Product (NDP)
- Gross Domestic Product (GDP)
Importance: National Income helps in:
- Understanding the economy's performance
- Making economic decisions
- Allocating resources

Indian Economy at the Eve of Independence

Characteristics:
- Underdeveloped Economy: India was a backward economy with low per capita income.
- Agricultural Economy: Agriculture was the dominant sector, with a majority of the population engaged in it.
- Dependent Economy: India was heavily dependent on British economy.
- Dual Economy: India had a dual economy with a modern capitalist sector and a traditional subsistence sector.
Problems:
- Poverty: Widespread poverty and income inequality.
- Unemployment: High levels of unemployment and underemployment.
- Backwardness: India lagged behind in industrial development.
- Colonial Legacy: India's economy was shaped by the colonial legacy, with a focus on exploiting natural resources.

Common Goal of 5 Year Plan

Common Goal: The common goal of 5 Year Plans is to achieve rapid economic growth and development.
Objectives:
- Rapid Industrialization: To achieve rapid industrialization and increase the pace of economic growth.
- Self-Reliance: To make India self-reliant and reduce dependence on foreign aid.
- Poverty Reduction: To reduce poverty and income inequality.
- Modernization: To modernize the economy and increase its competitiveness.
Key Features:
- Planning: A planning mechanism to allocate resources and achieve goals.
- Public Sector: A significant role for the public sector in key industries.
- Investment: Heavy investment in infrastructure and social sectors.
- ** Foreign Aid:** Dependence on foreign aid to supplement domestic resources.

National Income

National Income is the total value of all final goods and services produced within a country's border during a year.
Calculated using three methods: Value Added Method, Expenditure Method, and Income Method.
Comprises Gross National Product (GNP), Net National Product (NNP), Net Domestic Product (NDP), and Gross Domestic Product (GDP).
Important for understanding the economy's performance, making economic decisions, and allocating resources.

Indian Economy at the Eve of Independence

Characterized as an underdeveloped economy with low per capita income.
Agriculture was the dominant sector, with most of the population engaged in it.
India was heavily dependent on the British economy and had a dual economy with modern capitalist and traditional subsistence sectors.
Faced problems like widespread poverty, high unemployment, backwardness in industrial development, and a colonial legacy that exploited natural resources.

Common Goal of 5 Year Plan

Aims to achieve rapid economic growth and development.
Objectives include rapid industrialization, self-reliance, poverty reduction, and modernization.
Features a planning mechanism to allocate resources and achieve goals, a significant role for the public sector, heavy investment in infrastructure and social sectors, and dependence on foreign aid.

Description

This quiz covers the definition and calculation methods of national income, including the value added method, expenditure method, and income method. It also touches on the components of national income, such as GNP and Net National Product.