National Income

 

Topic: National Income (జాతీయ ఆదాయం - NI)

1. Introduction
* Topic: National Income (NI) or జాతీయ ఆదాయం.
* Reason for choosing this topic first: To address common student fear of Economics, particularly National Income, and build confidence.
* Emphasis: Requires full concentration and dedication to understand; casual learning is ineffective.

2. Strategy & Key Areas of Focus
* Goal: Identify key areas frequently tested in exams.
* The speaker will outline these areas to focus study efforts.
* Key Areas Identified:
* A. National Income Estimation Methods (జాతీయ ఆదాయ మదింపు పద్ధతులు): Crucial for exams; expect definite questions.
* B. Components and Concepts of National Income (జాతీయ ఆదాయ భాగాలు మరియు భావనలు): Includes Measurements, Concepts, Components. Often challenging for students.
* C. Social Accounting / Framework (సాంఘిక పరిగణన): Important related area.
* D. Items Included & Excluded in NI Calculation (పరిగణించే మరియు పరిగణింపబడని అంశాలు): A common point of confusion (e.g., Pensions are excluded).
* E. National Income Estimates (జాతీయ ఆదాయ అంచనాలు): Historical (pre/post-independence) and current estimators (NSO currently, formerly CSO). Includes Per Capita Income (తలసరి ఆదాయం).
* F. State Income (రాష్ట్ర ఆదాయం): GSDP / NSDP.
* G. Sectoral Contribution to National Income (వివిధ రంగాల వాటాలు): Shares of Agriculture, Industry, and Services.

3. Understanding National Income - Core Concepts
* Whose Income? It's the income/wealth of a nation as a whole.
* Includes: Income of Individuals, Private Institutions, Government Institutions, and the Government itself.
* Universal Definition (UNO): The total value of final goods and services produced within a country in one year.
* Simplified Core: National Income ≈ Value of Production (ఉత్పత్తి విలువ).
* How Income is Generated: Income (part of NI) arises only when goods or services are created/produced (సృష్టించినప్పుడు).
* Example: Hotel owner's income from selling food; Doctor's/Teacher's income from providing services.
* Exclusions: Income received without corresponding production of goods/services is NOT counted in NI.
* Examples: Pensions (transfer payments), gifts, lottery winnings, beggar's income.

4. Factors of Production & Factor Payments
* Production Requires: Factors of Production (ఉత్పత్తి కారకాలు)
* Land (భూమి)
* Labour (శ్రమ)
* Capital (మూలధనం)
* Organisation/Entrepreneurship (వ్యవస్థాపనం)
* Technology (సాంకేతికత - added later)
* Rewards/Payments to Factors (ప్రతిఫలాలు): These costs form the value of production.
* Land earns -> Rent (బాటకం)
* Labour earns -> Wages/Salaries (వేతనం)
* Capital earns -> Interest (వడ్డీ)
* Organisation earns -> Profit (లాభం)
* Technology (Implicitly) earns -> Royalty (రాయల్టీ)
* Concept Link: Value of Production (e.g., Price of a Pen) = Sum of Factor Costs/Payments incurred.
* Income Perspective: National Income = Sum of all factor incomes (Rent + Wages + Interest + Profit + Royalty) earned in the economy. All legitimate NI earnings fall into these categories.

5. Three Perspectives (Leading to Three Methods)
* National Income can be viewed/measured from three angles, which should ideally yield the same result:
* Production Angle: The total value of goods and services produced.
* Income Angle: The total income earned by factors of production (Rent, Wages, Interest, Profit, Royalty).
* Expenditure Angle: The total spending in the economy.
* People's Spending = Consumption (C - వినియోగం)
* Firms' Spending = Investment (I - పెట్టుబడి)
* Government's Spending = Government Expenditure (G - ప్రభుత్వ వ్యయం)
* (Note: Savings are channeled into investment via banks).

6. Methods of National Income Estimation (జాతీయ ఆదాయ మదింపు పద్ధతులు)
* These correspond to the three perspectives:
* Method 1: Production Method (ఉత్పత్తి మదింపు పద్ధతి): Measures the value added at each stage of production or the final value of goods & services.
* Method 2: Income Method (ఆదాయ మదింపు పద్ధతి): Sums up all factor incomes earned within the country.
* Method 3: Expenditure Method (వ్యయం మదింపు పద్ధతి): Sums up total spending on final goods and services (C + I + G + Net Exports usually).

7. India's Practice in NI Estimation
* Primary Methods Used: Production Method and Income Method.
* Sectoral Application:
* Production Method: Used mainly for Agriculture and Industrial sectors (where output quantity is measurable).
* Income Method: Used mainly for the Services sector (where quantity is hard to measure, focus is on income earned).
* Expenditure Method: Used very sparingly (e.g., limited rural construction estimates) because:
* Difficulty in accurately tracking widespread cash transactions.
* If all transactions were digital/account-based, this method could be very accurate.
* Exam Nuance:
* Total methods available/used technically: 3
* Primary methods predominantly used: 2
* State Income Estimation: Often uses all three methods.