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Names
The names of the measures consist of one of the words "Gross" or "Net", followed by one of the
words "National" or "Domestic", followed by one of the words "Product", "Income", or
"Expenditure". All of these terms can be explained separately.
"Gross" means total product, regardless of the use to which it is subsequently put.
"Net" means "Gross" minus the amount that must be used to offset depreciation – ie.,
wear-and-tear or obsolescence of the nation's fixed capital assets. "Net" gives an
indication of how much product is actually available for consumption or new investment.
"Domestic" means the boundary is geographical: we are counting all goods and services
produced within the country's borders, regardless of by whom.
"National" means the boundary is defined by citizenship (nationality). We count all goods
and services produced by the nationals of the country (or businesses owned by them)
regardless of where that production physically takes place.
The output of a French-owned cotton factory in Senegal counts as part of the Domestic
figures for Senegal, but the National figures of France.
"Product", "Income", and "Expenditure" refer to the three counting methodologies
explained earlier: the product, income, and expenditure approaches. However the terms
are used loosely.
"Product" is the general term, often used when any of the three approaches was actually
used. Sometimes the word "Product" is used and then some additional symbol or phrase
to indicate the methodology; so, for instance, we get "Gross Domestic Product by
income", "GDP (income)", "GDP(I)", and similar constructions.
"Income" specifically means that the income approach was used.
"Expenditure" specifically means that the expenditure approach was used.
Note that all three counting methods should in theory give the same final figure. However, in
practice minor differences are obtained from the three methods for several reasons, including
changes in inventory levels and errors in the statistics. One problem for instance is that goods in
inventory have been produced (therefore included in Product), but not yet sold (therefore not yet
included in Expenditure). Similar timing issues can also cause a slight discrepancy between the
value of goods produced (Product) and the payments to the factors that produced the goods
(Income), particularly if inputs are purchased on credit, and also because wages are collected
often after a period of production.
GDP and GNP
Main articles: GDP and GNP
Gross domestic product (GDP) is defined as the "value of all final goods and services produced
in a country in 1 year".[4]
Gross National Product (GNP) is defined as the market value of all goods and services produced
in one year by labour and property supplied by the residents of a country.[5]
As an example, the table below shows some GDP and GNP, and NNI data for the United States:
[6]
2010-07-01 15:38
NATIONAL INCOME is a measure of money value of the total flow of goods and
services produced by an economy over a specified period of time. It can be
calculated in three ways:
1. as the value of the outputs of all goods and services in the economy, net of
indirect taxes and subsidies, and corrected fro inter-industry sales so as to
avoid double- counting;
2. as the sum of expenditure on consumers goods and investment goods,
government expenditure, and expenditure by foreigners on our exports less
domestic expenditure on imports.
In principle, each of these methods of measurement should give the same result,
since the flow of expenditure on goods and services must equal the sales value of
those goods and services, which in turn must equal the incomes paid out by firms
as wages, salaries, interest, dividends, rent, etc., plus undistributed profits.
However, in practice, because of measurement problems, the three separate
estimates of national income usually diverge, and the value finally is a ‘compromise
estimate’ of the three.
Since national income measures the flow of goods and services produced, its level
can be taken as an indicator of the well-being of the economy, though, clearly, it
can never be a perfect indicator of this. The latter depends not only on the size of
the flow of goods and services, but also on the way in which this is distributed
among households, the quality of the goods themselves, the state of environment,
etc., which need by no means improve with a rising national income.
National income is defined to include not only the incomes which arise from
production within the economy, but also income which accrues to domestic
residents from activities carried on abroad. Given also that it is calculated net of
indirect taxes, it is identical to gross national product at factor cost. If we deducted
an amount equal to depreciation, it would then be identical to net national product
at factor cost.
Internationally some countries are wealthy, some countries are not wealthy and some countries are in-
between. Under such circumstances, it would be difficult to evaluate the performance of an economy.
Performance of an economy is directly proportionate to the amount of goods and services produced in an
economy. Measuring national income is also important to chalk out the future course of the economy. It
also broadly indicates people’s standard of living.
Income can be measured by Gross National Product (GNP), Gross Domestic Product (GDP), Gross
National Income (GNI), Net National Product (NNP) and Net National Income (NNI).
In India the Central Statistical Organization has been formulating national income.
However some economists have felt that GNP has a measure of national income has limitation, since they
exclude poverty, literacy, public health, gender equity and other measures of human prosperity.
Instead they formulated other measures of welfare like Human Development Index (HDI)
Production Method
The production method gives us national income or national product based on the final value of the
produce and the origin of the produce in terms of the industry.
Income Method:
Different factors of production are paid for their productive services rendered to an organization. The
various incomes that includes in these methods are wages, income of self employed, interest, profit,
dividend, rents, and surplus of public sector and net flow of income from abroad.
Expenditure Method:
The various sectors – the household sector, the government sector, the business sector, either spend their
income on consumer goods and services or they save a part of their income. These can be categorized as
private consumption expenditure, private investment, public consumption, public investment etc.
Secondar Ter
Year Primary y y
1950-51 59 13
1980-81 42 22
2002-03 24 24
GDP of India
The Indian economy is the 12th largest in USD exchange rate terms. India is the second fastest growing economy in
the world. India’s GDP has touched US$1.25 trillion. The crossing of Indian GDP over a trillion dollar mark in 2007
puts India in the elite group of 12 countries with trillion dollar economy. The tremendous growth rate has coincided
with better macroeconomic stability. India has made remarkable progress in information technology, high end
services and knowledge process services.
However cause for concern would be this rapid growth has not been an inclusive in nature, in the sense it has not
been accompanied by a just and equitable distribution of wealth among all sections of the population. This economic
growth has been location specific and sector specific. For e.g. it has not percolated to sectors were labor is intensive
(agriculture) and in states were poverty is acute (Bihar, Orissa, Madhya Pradesh and Uttar Pradesh).
Though India has the second highest growth rate in the world, its rank in terms of human development index (which is
broadly used has a measure of life expectancy, adult literacy and standard of living) has gone down to 128 among
177 countries in 2007 compared to 126 in 2006.
1960-1980 : 3.5%
1980-1990 : 5.4%
1990-2000 : 4.4%
2000-2009 : 6.4%
The contributions of various sectors in the Indian GDP for 1990-1991 are as follows:
Agriculture: - 32%
Industry: - 27%
Service Sector: - 41%
The contributions of various sectors in the Indian GDP for 2005-2006 are as follows:
Agriculture: - 20%
Industry: - 26%
Service Sector: - 54%
The contributions of various sectors in the Indian GDP for 2007-2008 are as follows:
Agriculture: - 17%
Industry: - 29%
Service Sector: - 54%
It is great news that today the service sector is contributing more than half of the Indian GDP. It takes India one step
closer to the developed economies of the world. Earlier it was agriculture which mainly contributed to the Indian GDP.
The Indian government is still looking up to improve the GDP of the country and so several steps have been taken to
boost the economy. Policies of FDI, SEZs and NRI investment have been framed to give a push to the economy and
hence the GDP.
Rich getting richer: 120k Indians hold a third of national income
NEW DELHI: Last year may have been a cruel year for much of the country with slow
growth and double-digit food inflation, but India's high net worth
HNWIs, in this context, are defined as those having investable assets of $1 million or more,
excluding primary residence, collectibles, consumables, and consumer durables. According to
the 2009 Asia-Pacific Wealth Report, brought out by financial services firms Capgemini and
Merrill Lynch Wealth Management, at the peak of the recession in 2008, India had 84,000
HNWIs with a combined net worth of $310 billion. To put that figure in perspective, it was just
under a third of India's market capitalization, that is, the total value of all companies listed on the
Bombay Stock Exchange — as of end-March 2008. The average worth of each HNWI was Rs
16.6 crore.
To get a fix on just how rarefied a level it puts them in, we did some simple calculations that
threw up stunning numbers. It would take an average urban Indian 2,238 years, based on the
monthly per capita expenditure estimates in the 2007-8 National Sample Survey, to achieve a net
worth equal to that of the average HNWI. And that's assuming that this average urban Indian just
accumulates all his income without consuming anything. A similar calculation shows that an
average rural Indian would have to wait a fair bit longer — 3,814 years!
According to the firms' 2010 World Wealth Report, India now has 126,700 HNWIs, an increase
of more than 50% over the 2008 number. While the figure for combined net worth is not
available, it seems safe to assume that as a class not only have India's super-rich recouped their
2008 losses, they have even made gains over their pre-crisis (2007) positions. In 2007, 123,000
HNWIs were worth a combined $437 million.
Meanwhile, in 2009 alone, an estimated 13.6 million more people in India became poor or
remained in poverty than would have been the case had the 2008 growth rates continued,
according to the United Nations Department of Economic and Social Affairs (UNDESA). Also,
an estimated 33.6 million more people in India became poor or remained in poverty over 2008
and 2009 than would have been poor had the pre-crisis (2004-7) growth rates been maintained
over these two years.
The 2009 Asia-Pacific Wealth Report notes that the HNWI population in India is also expected
to be more than three times its 2008 size by the year 2018, with emergent wealth playing a key
role. Like China, relatively few among the current HNWI population (13%, compared to 22% in
Japan) have inherited their wealth and even fewer (9%) are over the age of 66.