There are various difficulties in estimation of national income. The
main difficulties are briefly explained as follows:
1.
Inadequate and
Unreliable Data: -a major problem in estimation of national
income is data collection. Quite often, the data collected by the Government
agencies for complication of national income is inadequate and unreliable.
Also, the sources form which data is collected, do not disclose proper
information with respect to the income or value of goods and services. People
often understate their income, while expenditure is overstated.
2.
Problem of Double
Counting: - Double counting problem is associated with the
inventory method of calculating national income. Double counting takes place
when a commodity or raw material is being included twice in the calculation of
national income. To avoid this problem the value of only final goods and
services taken into consideration. But this is not always done, and therefore,
there are cases of double counting.
3.
Problem of
non-monetized sector: -In India, especially, in rural areas, there
exists the non-monetized sector. Under non-monetised sector, goods and services
are exchanged on barter basis. Therefore the goods and services from the
non-monetized sector do not form a part of the national income.
4.
Problem of Black
Money Transactions: - In India, there are number of black money transactions, may be
because of heavy taxes. The black money transactions are not accounted in the
national statistics.
5.
Problem of Transfer
Payments: -National Income does not include transfer payments such
as ole age pensions, scholarships, interest paid on national debt, etc.
National income includes only income payments, i.e., payments to the factors of
production. Therefore, the national income does not reveal (disclose) a true
picture of the real income of the country.
6.
Illegal Income: -There are a number of illegal activities taking place in the country. The
illegal income is not included in national income because it cannot be
officially recorded.
7.
Problem of
Unorganised Sectors: - The unorganised sector is that sector where the
workers are not organised in form of workers’ union. In India, about 93% of the
workers work in unorganised sector. Quite often, the unorganised sector, i.e.,
small scale units, agriculture sector, etc., do not keep proper records
relating to workers and other factors of production for various reasons.
8.
Problem of Definition
of National Income: -for the purpose of calculating national
income, only the paid goods and services are included. But the certain services
such as services of a housewife, social services, etc., are not
paid and therefore, they are not included in the estimation of national income.
