Page 53 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 5: Trends and Structure of National Income Since 1951
Pavitar Parkash Singh, Lovely Professional University

Unit 5: Trends and Structure of National Income Since 1951 Notes

CONTENTS
Objective
Introduction
5.1 Trends and Structure of National Income
5.2 Trends in National Income Growth and Structure
5.3 Summary
5.4 Key-Words
5.5 Review Questions
5.6 Further Readings

Objectives

After reading this Unit students will be able to:
• Describe the Trends and Structure of National Income.
• Analyse the National Income Growth and Structure.
Introduction

In an economy, every sector utilises natural, human and material resources and contributes to the
aggregate flow of goods and services during a given time period. Each specific period may be described
in terms of a year. The income earned by a country’s people, including labour and capital investment
in a year is hence called national income. A variety of measures of national income and output are
used in economics to estimate total economic activity in a country or region, including Gross Domestic
Product (GDP), Gross National Product (GNP), and Net National Income (NNI). All are especially
concerned with counting the total amount of goods and services produced within some “boundary”.
The boundary is usually defined by geography or citizenship, and may also restrict the goods and
services that are counted. For instance, some measures count only goods and services that are
exchanged for money, excluding bartered goods, while other measures may attempt to include bartered
goods by imputing monetary values to them.
5.1 Trends and Structure of National Income

According to the National Income Committee, “A national income estimate measures the volume of
commodities and services turned out during a given period, counted without duplication.” Thus, a
total of national income measures the flow of goods and services in an economy. National Income is
a flow and not a stock. As contrasted with national wealth which measures the stock of commodities
held by the nationals of a country at a point of time, national income measures the productive power
of an economy in a given period to turn out goods and services for the satisfaction of human wants.
Pre-Independence Period Estimates

Several estimates of national income were prepared in the British period. Notable among the estimators
were : Dadabhai Naoroji (1868), William Digby (1899), Findlay Shirras (1911, 1922 and 1931), Shah
and Khambatta (1921), V.K.R.V. Rao (1925-29 and 1931-32) and R.C. Desai (1931-40).
In the pre-independence estimates, Dadabhai Naoroji, Shah and Khambatta, Findlay Shirras, Wadia
and Joshi estimated the value of the output of the agricultural sector and then added a certain
percentage as the income of the non-agricultural sector. The assumptions of most of these estimators

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