National Income and Its Calculation Methods

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.