National income refers to the value of goods & services produced by a nation during a particular financial year. Therefore, it is the net result of all the economic activities that take place during a financial year and is valued in monetary terms. It includes payments made to various resources either in form of rents, wages, interests and profits. A country’s progress can be estimated by the growth of its national income.
According to Marshall, “The labor and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.”
Identify and classify the production units into primary, secondary and tertiary sectors.
Estimate Gross Domestic Product at Market Price: Sum of Gross Value Added at MP = GDP at MP.
Calculate Domestic Income (NDP at FC), NDP at FC = GDP at MP - Depreciation - Net Indirect Taxes.
Estimate Net Factor Income from Abroad (NFIA) to arrive at National Income. NNP at FC = NDP at FC + NFIA.
The value-added method for calculating national income is also known as:
(i) Product Method
(ii) Inventory Method
(iii) Net Output Method
(iv) Industry Origin Method, and
(v) Commodity Service Method