Various Methods or Approaches to Calculate National Income – Indian Economy UPSC Notes
National income is the total monetary value of all final goods and services produced within a country during a specific period, typically a year.
Various Methods or Approaches to Calculate National Income National income is the total monetary value of all final goods and services produced within a country during a specific period, typically a year. Economists use different methods to calculate national income, depending on the aspect of the economy they aim to measure. The three primary methods are: 1. Production or Value-Added Method This method calculates national income by summing the value added at each stage of production in an economy. Steps to Calculate : Identify and classify industries (agriculture, manufacturing, services, etc.). Calculate the Gross Value of Output : The total value of goods and services produced. Subtract Intermediate Consumption : The value of raw materials and services used in production. Sum the Value Added across all sectors to get Gross Domestic Product (GDP) at factor cost. Formula : Value Added = Gross Output − Intermediate Consumption \text{Value Added} = \text{Gross Output} - \text{Intermediate Consumption} Exa…