DMPQ: Explain in detail the methods to calculate National Income.

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There are 3 methods to calculate the National income.These methods are given by Simon Kuznets.

  • PM (Product Method) or Product service method.
  • IM (Income Method)
  • CM (Consumption Method) or expenditure method.

In India the combination of Product method and Income methods is used for calculating the National Income.

 

PRODUCT METHOD:

NI = GDP  – income earned in foreign countries – Depreciation.

In the Product method the GDP is taken into consideration.Net income earned in foreign countries is deducted from the GDP.From this the depreciation is subtracted.

 

INCOME METHOD:

In this method the National Income is calculated by

National Income = Total Rent Plus (+) Total wages Plus (+) Total Interest Plus (+) Total Profit.

The total net income of the people working in different sectors and commercial sectors are taken into consideration.

 

Consumption Method:

This method is not generally used for calculating the National income.According to this method

  • National Income =Total Consumption Plus Total Savings

 

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