Page 31 - DECO402_Macro Economics

Macroeconomic Theory

Notes Net national income at factor cost = National income = Compensation of employees
+ Rent
+ Interest Operating Surplus
+ Profit = Domestic income = Net Domestic Product at Factor Cost
+ Mixed income of self employed
+ Net factor income from abroad
In short
Net National Product at Factor Cost = Net Domestic Product at Factor Cost + Net Factor Income
from Abroad
NNP = NDP = Net Factor Income from Abroad
FC FC

(ix) Income from Net Domestic Product Accruing to Private Sector

Two sectors have found in each economy:
(i) Private Sector - In there all those corporate and non-corporate enterprises are included
whose ownership and controlling are in the hands of private hands. The income of this
sector is called income from net domestic product accruing to private sector.
(ii) Government or Public Sector – In this administrative departments, departmental enterprise
(as a Railway and Postal department) and non-departmental enterprise (as a Air India,
Indian Airlines) are included.
Income from domestic product to government (or public) are included, (1) Income from property
and entrepreneurship accruing to administrative departments and, (2) Savings of non-departmental
enterprises. Hence, the income form domestic product accruing to private sector is that income which
only accruing to private sector.
In Dernburg’s words, “Factor income from net domestic product accruing to private sector is that part
of factor cost of net domestic product generated in the form of compensation of employees, operating
surplus and mixed income which is accured to the private sector.”
For the estimation of factor income from net domestic product accruing to private sector, from net
domestic product at factor cost, (i) income accruing to government from departmental properties and
entrepreneurship and, (ii) savings of non-departmental enterprises are deducted.

Factor income from net domestic product accruing to private sector = Net Domestic Product at
Factor Cost – Income accruing from departmental enterprise’s property and entrepreneurship –
Savings of non-departmental enterprises.

(x) Private Income

Private income means that income which accruing to private sector from all sources, productive or
others during a financial year. Private sector’s factor income and transferable payment is included
in this also.
According to Central Statistical organisation, “Private income is the total of factor income from
all sources and current transfers from the government and rest of the world accruing to private
sector.”

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