National Income Calculation: Items NOT Included part 18

 Okay, here are the notes summarizing the key points from the Telugu audio lecture on National Income Calculation, focusing on items not included:

National Income Calculation: Items NOT Included (Jatheeya Aadaya Gananalo Pariganimpabadani Amshalu)

Core Principle:

• National Income generally includes the value of final goods produced and services rendered within a specific period.

• Items are excluded primarily to avoid double counting or because they do not represent actual production/economic activity or lack a clear market value.

Specific Items NOT Included in National Income Calculation:

1. Intermediate Goods (Madhyamika Vastuvula Viluva):

   • Reason: Their value is already incorporated into the value of the final goods. Including them separately would lead to double counting.

   • Examples: Thread used to make a shirt; sand, cement, iron used to build a house.

2. Semi-finished Goods (Sagam Tayaraina Vastuvulu):

   • Reason: Production is incomplete at the end of the accounting period. Only the value of final, completed goods and services is counted.

3. Value of Housewives' Services (Gruhinula Sevala Viluva):

   • Reason: While these are valuable services, they are not exchanged in the market for a monetary price and thus lack a quantifiable market value for national income accounting purposes in India.

4. Services of Voluntary Organizations (Swachhanda Samsthala Sevalu):

   • Reason: Similar to housewives' services, these are performed without expectation of monetary payment and lack a market value.

5. Producer Goods / Inputs (Utpadakala Viluva):

   • Reason: Similar to intermediate goods, their value is part of the final product. Including them separately leads to double counting.

   • Example: Cotton used by a spinning mill; yarn used by a weaving mill. (Context matters: the same item can be final or intermediate/producer depending on its use).

6. Windfall Gains (Gali Vaatu Labhalu):

   • Reason: Income received without any corresponding productive activity or service rendered in the current period.

   • Examples: Winnings from lotteries, gambling, betting.

7. Sale of Old/Used Goods & Scrapped Machinery (Pata Vastuvulu, Kaalam Chellina Yantralu):

   • Reason: The value of these goods was already counted when they were originally produced (when they were new). Counting their resale value leads to double counting.

   • Exception: The commission earned by agents facilitating the sale of second-hand goods is included, as it represents a service provided in the current period.

8. Unsold Stock (Vikrayam Kaagala Migulu - if not held for self-consumption):

   • Reason: Goods produced but neither sold nor self-consumed by the producer during the accounting period. Their value hasn't been realized in the market yet.

9. Financial Transactions (Sale/Purchase of Bonds, Shares, Securities):

   • Reason: These represent the transfer of ownership of financial assets or claims, not the production of new goods or services. They are paper transactions.

   • Note: Income derived from these assets (like dividends or interest) is treated differently, often as factor income, but the transaction value itself isn't part of NI.

10. Gifts and Donations (Bahumatulu):

    • Reason: These are transfer payments; no productive activity is performed in return for the gift.

11. Transfer Payments (Badili Chellimpulu):

    • Reason: Payments made (often by the government) for which no current goods are produced or services are rendered in exchange.

    • Examples: Pensions, scholarships, unemployment benefits.

12. Income from Illegal Activities (Chatta Vyatirekamaina Karyakalapalu):

    • Reason: These activities are outside the scope of legitimate, measurable economic production.

    • Examples: Smuggling, income from black market operations.

13. Value of Leisure Time (Vishranti Samayam Viluva):

    • Reason: Leisure time itself does not have a market value. (Paid leave is handled differently – the income might be counted, but the value of the leisure time itself is not added).

14. Interest on National Debt / Public Debt (if used for Unproductive Purposes):

    • Reason: If the government borrowed money (public debt) and used it for non-income-generating purposes (e.g., war, general administration), the interest paid on that debt is treated as a transfer payment, not factor income.

    • Contrast: If the debt was used for productive investment, the interest is included.

15. Depreciation (Tarugudala):

    • Reason: Depreciation is excluded when calculating Net National Product (NNP) or Net Domestic Product (NDP). It represents the consumption of fixed capital and is subtracted from Gross concepts (GNP/GDP) to arrive at Net figures. (NNP = GNP - Depreciation).

16. Subsidies (Subsidy-lu) & Indirect Taxes (Paroksha Pannulu):

    • Reason: These are adjusted when converting between National Income at Market Price and National Income at Factor Cost. They distort market prices compared to the actual cost of factors.

      • Indirect taxes are included in Market Price but excluded from Factor Cost.

      • Subsidies are effectively deducted from Market Price (or added to Factor Cost). (NI at MP = NI at FC + Indirect Taxes - Subsidies).

17. Financial Help between Family Members (Kutumba Sabhyula Arthika Sahayam):

    • Reason: Similar to gifts/transfers; considered a transfer within the family unit, not generated from productive activity.

Importance of National Income Calculation (Why Calculate?):

• Measure economic growth and performance year-on-year.

• Analyze the contribution of different sectors (Agriculture, Industry, Services) to the economy.

• Identify lagging sectors and formulate policies for development.

• Assess and compare regional income levels (inter-state/district disparities) for balanced growth policies.

• Provide a basis for government economic policy formulation (budgeting, planning, fiscal/monetary policy).

• Enable international comparisons of economic performance and standards of living.

• Indicate the average standard of living (through Per Capita Income) and understand income distribution patterns.

• Help understand economic trends like inflation and recession.