What is National Income? What are the features of National Income?

Meaning: -In ordinary sense, national income refers to the total value of goods and services produced in a country during a particular year. In a broader sense, the national income can be viewed from three angles.

·         Production Angle

·         Distribution Angle

·         Disposition Angle

Definitions: -The national divided or income consists solely of services as received by ultimate consumers whether from their human environments. Thus a piano or an overcoat made for me this year is not a part of this year’s income, but an addition to capital. Only the services rendered to me during this year by these things are income”

Defined by.....................  Irvin Fisher

Following are the some of the important Features of National Income

1.      Macro economic concept: - The National income is a study of Macro economics concept. It is the aggregate income of all goods and services produced in a country during a given year. It provides a clear picture country’s economic performance during a particular year.

2.      Flow concept: - National income is a flow concept i.e. flow of goods and services produced in the economy during a year. It varies according to variations in production within the country. National income flows only if there is productivity activity in the economy.

3.      Real terms and Money Terms: - The national income can be expressed in real terms as well as in money terms.

·         Real National Income: - when national income is expressed as a flow of goods and services produced in the economy in a year, it is called as real national income.

·         Money National Income: -When national income is expressed as the value of all goods and services produced in the economy during a year, it is called as money national income. 

4.      Value of final goods and services: -While calculating national income, only the value of final goods and services is included. The value of intermediate goods such as raw materials is not included. This is done to avoid double counting.

5.      Transfer Income: -While calculating national income, the transfer income in the form of old age pension, unemployment allowances, scholarships, etc., is not included. The transfer income is received by receipts without providing any factor unit such as labour, capital, etc.

6.      Financial Year: - In India, the national income is estimated by Central Statistical Organisation. It is annually estimated and measured for a financial year beginning from 1^st April and ending on 31^st March.

Net income from Abroad: -While calculating national income the net income received from abroad is included. The net income from abroad includes difference between exports and imports, as well as net income from investments abroad. If the net income is negative, then that amount is deducted from national income.