Presentations of Eco

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PRESENTED BY:

`

Prerana mittal` Sumit kumar

` Pinky sood



TOPIC OF DISCUSSION

PROBLEM AND PRECAUTIONS INMEASURING NATIONAL INCOME



How income generated and how itflows in the

economy????????????

----------------------------------



Circular Flow Diagram

source:->http://www.economy.com//chart



What is national income.?

` National income (NNPFC) :-> Final value of goods andservices produced in a year.

` The first attempt to calculate national income of India wasmade by Dada Bai Naoroji in 1867-68.

` why the study of national income is given so much importance.

To estimate economic development.

To know how far development objectives were achieved.

` To know the contribution of various sectors to nationalincome. Efficiency

` The major indicator of economic growthis national income. Efficiency,Equity

Growth ,Stability .



WHAT IS IMP. WHILE CALCULATINGWHAT IS IMP. WHILE CALCULATING NYNY AND LEVEL AND LEVEL

OF GROWTH OF ECONOMY????(for an economist)OF GROWTH OF ECONOMY????(for an economist)

The rate of economic growth

Because it shows the

1. Changes over time to the average living standards of the population

2. Changes over time to the distribution of income between different groups within the

population (i.e. measuring the scale of income and wealth inequalities within society)

Note: Consumer spending accounts for over two thirds of total spending. Consumer

spending has

been strong in recent years, a reflection of rising living standards and low unemployment, but

this may now be coming to an end because of the mountain of household debt .

This influence national income.



VALUE ADDED METHOD

The output approach focuses on finding the total output of anation by directly finding the total value of all goods and services

a nation produces.

` Formulae:GDP(gross domestic product) at market price = value

of output in an economy in a particular year -

intermediate consumption

` NNP at factor cost = GDP at market price -

depreciation + NFIA (net factor income from abroad) -

net indirect taxes.



THE INCOME METHOD

` The income approach equates the total output of a nationto the total factor income received by residents of the

nation.` The main types of factor income are:

` Employee compensation (= wages +, including unemployment, health, andretirement benefits);

` Interest received net of interest paid;

` Rental income (mainly for the use of real estate) net of expenses of landlords;` Royalties paid for the use of intellectual property and extractable natural

resources.

` Formulae:

` NDP at factor cost = Compensation of employees + Net interest+ Rental & royalty income + Profit of firms + Income from self-employment.

` National income = NDP at factor cost + NFIA (net factor incomefrom abroad).



EXPENDITURE METHOD

` It define as the total output of a nation by finding the total amount of money spent.

` This is acceptable, because like income, the total value of all goods isequal to the total amount of money spent on goods..

` GDP = C + I +

G+ (X - M

)` Where:

C = household consumption expenditures / personal consumptionexpendituresI = gross private domestic investmentgross private domestic investment

G = government consumption and gross investment expendituresX = gross exports of goods and servicesM = gross imports of goods and services

` Note: (X - M) is often written as XN, which stands for "net exports"



PROBLEM IN MEASURING NATIONAL

INCOME

` EFFECTS OF INFLATION:When we want to measure growth in the economy we have to adjust for the effects of inflation.Real GDP measures the volume of output produced within theeconomy. An increase in real output means that AD has risen

faster th

an th

e rate of inflation and th

erefore th

e economy isexperiencing positive growth. THUS it create problem.

` DOUBLE COUNTING: when we calculate value of both

intermediate and final products. So it create problem.



Inflation rate 2010

India food inflation declines to 11.05, percent on February 17,2011

India food inflation declines to 13.07 percent on February 10, 2011

India food inflation rose at 17.05 percent on February 3, 2011

India food inflation rose at 15.57 percent on January 27, 2011

India's food inflation rate eases to 15.52% on January 20, 2011

India's food inflation rate eases to 16.91% on January 13, 2011



ECONOMY LOSS DURING2009-10(IN SOME SECTORS)

` Take the fast-moving consumer goods (FMCG) industry forinstance. It loses 6-7% of its turnover due to counterfeitproducts and illegal imports. The size of the FMCG industry isaround Rs 1,00,000 crore, which pegs the losses to the sectorfrom counterfeiting at Rs 7,000 crore.

` The drugs tested in a countrywide survey conducted by theDrug Controller-General of India, 0.4% were found to bespurious.

` The size of India·s pharmaceutical industry is Rs 90,000 crore.

the estimated LOSS OF Rs 360 crore.

` The economic value loss would be in excess of Rs 3,000 crore.



THIS table shows the gross national product

and the net national product of India:-

Year GNP NNP

1992 - 93 618969 546023

93 - 94 769265 685912

94 - 95 901111 803090

95-96 1053736 936548

96-97 1224208 1089563

97-98 1376943 1224946

98-99 1583110 1415044

99-2000 1740207 1557781

2000-2001 1900310 1702454

2001-2002 2801350 1864292

SOURCE:-ANNUAL REPORT OF INDIA TIL 2002



THE GDP growth rate IN INDIA

YEAR GROWTH

2000 5.5

2001 6

2002 4.3

2003 4.3

2004 8.3

2005 6.2

2006 8.4

2007 9.2

2008 9

2009 7.4

2010 8

NO OF

YEAR

1

2

3

4

5

6

7

8

9

10

11

0

2

4

8

10

1 2 3 4 5

7 8 9 10 11

5.5

4.3 4.3

8.3

.2

8.49.2 9

7.48

1 2 3 4 5

7 8 9 10 11



Precautions in the Estimation of National Income byProductMethod

` There are certain items which should not be included anditems which are to be included while estimating nationalincome.

`

Own account production of fixed assets are included inthe national income.

` Items are produced for self consumption which do notenter the market.

` Imputed rent is included.

` Any transactions (sale and purchase) related to secondhand goods are not included in the national income.

` Commission or brokerage earned out of such transactions are included.



Contd««««.

` Transactions related to financial assets such as sale andpurchase of bonds and shares are also not to be includedin the measurement of national income as they do notgenerate any new income or contribute to the flow of

goods and services.

` Services rendered by housewives are also excluded fromthe measurement of national income.



Precautions in the Estimation of National Income byIncome Method

1. Income received from sale and purchase of second hand goodsshould not be included but commission earned in such transactions is to be included.

2. Transfer payments which do not generate income are to be

excluded from the measurement of national income.3. Incomes from gambling, smuggling etc are not to be included

as these are illegal activities.4.Windfall profits or gains are sudden incomes arise due to

favourable conditions at certain times such as income fromlotteries etc. These are not hard earned income. Such incomeis not included in the national income.

5. Income from interest on national debt is also not included inthe national income as this income is from financialcapital, which are only paper claims and they do not generateany new income.



PRECAUTIONS in ESTIMATING

NATIONAL INCOME by expnd.. method

` Imputed rent of owner occupied houses has to be included as itis a part of final consumption expenditure of households.

` Value of goods kept for self -consumption should be includedbecause it is also past if final consumption expenditure of

households.` All own account production of fixed assets for which

corporate enterprises, govt. and household enterprises hasincurred expenditures have to be included.

` All expenditures on transfer payments made by Govt. orenterprises to the households in the form of old agepensions, scholarships, unemployment benefits etc. are notincluded because these are unilateral payments.



Contd««««

` Expenditures on purchase of second hand goods should not beincluded because they were included in the year they weremanufactured.

` Expenditures on purchase of shares and bonds should not be

included because these are only financial transactions.Expenditures incurred on intermediate goods should not beincluded otherwise it leads to the problem of double counting.

` Expenditure incurred on any kind of taxes should not be taken

because they are a kind of transfer payment.



contd«««««..

The following to be included when calculating expenditure on new construction:

Own A/c prod. Of fixed assets

Purchase of new houses by consumer households.

Work in progress at construction site

Capital repairs like major alterations or adding of new rooms to existing buildings



Real GDP Growth in 7 Countries

source:->http://www.nationmaster.com/graph/real-gross-domestic-income



GROWTH OF INDIAN ECONOMY

`

"We believe that the (Indian) economy will grow by animpressive 9.2 per cent in fiscal 2010-11," the Centre forMonitoring Indian Economy (CMIE) said in its latest

review of the country's economy today.` 'Swiss black money can take India to the top'

: the average amount stashed away from India annually during 2002-06 is $27.3

billion (about 136,466 crore).. The share of Swiss banks in dirty money being a

third of the global aggregate, some $45 billion out of the 136.5 billion stashed

away from India would have been hoarded in these years in Swiss banks.

` India received foreign direct investment (FDI) equityworth US$ 12.39 billion during April-October, 2010-11



TOP 20 INDUSTRIES IN INDIA IN YEAR

2009-2010

SOURCE :-->WWW.departmentofcommerceorums/managerial-economics/42979



IT AFFECT NATIONAL INCOME

source:->http://www.nationmaster.com/graph/



Private and public industryemployment in India(2003)

Source:h

ttp://en.wikipedia.org/wiki/File:Private_and_public_industry_employment_in_India%282003%29.png



CURRENT KNOWLEDGE

` India: has Gross National Income (per capita) $441.56 perperson .

` The number of people living below the poverty line(BPL) inIndia is 37.2 per cent of the total population.(2010)

` The monthly income of an average IndianIndian for the first time inthe country's history has crossed Rs 3,000, thanks toeconomic reforms and a high growth rate of above 9 percent achieved for three years since 2005-06.

` The CSO data says that the national income at 1999-2000prices increased by 6.4 per cent to Rs 29.42 lak h crore during2008-09. (In India national income is calculated and publishedby the Central StatisticalOrganisation (CSO).)



REFRENCES` http://www.globalens.com/cases1.aspx` http://www.managementparadise.com/forums/managerial-

economics/42979-national-income-india.html

` http://economictimes.indiatimes.com/news/economy/indic

ators/cmie-projects-an-impressive-92-per-cent-gdp-growth-for-fy-11/articleshow/7509567.cms(FOR GDP)

` http://www.flipkart.com/sem/book/p/economic%20growth%20in%20india?gclid=CNHT_8CplKcCFUUb6wodcVX0s

Q` http://www.nationmaster.com/graph/eco_gro_nat_inc_pe

rcap-gross-national-income-per-capita

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