What Are The Problem And Challenges Of Computing National Income Of India?


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Difficulties of various kinds are generally faced in the measurement of national income. These difficulties may be classified into two categories: (I) Conceptual or Theoretical Difficulties and (ii) Practical Difficulties. The theoretical difficulties appear in almost all countries but the practical difficulties are generally witnessed in the underdeveloped countries like India.Conceptual difficulties- (1) Determination of intermediate and final goods- While estimating the national income, it is always not possible to make a clear distribution between intermediate goods and final goods.(2) Services without remuneration (3) Transfer payments- Transfer payments are the sources of income for the households and the business firms, but these do not form part of the national income. (4) Pricing of products- Valuation of the final products for the purposes of national income estimation is a difficult task.(5) Income of the foreign companies- It is again a matter of controversy, whether the income of the foreign firms should be included in the national income or not.Practical difficulties-(1) Non-monetised sector- A large part of the underdeveloped countries consists of non-monetised sector, which is excluded from the national income. (2) Lack of occupational specialisation-  It means that a person performs a number of economic activities at one and the same time, so it becomes impossible to trace out the main source of earning of an individual. Due to this, a large part of income remains excluded from the national income.(3) Non-availability of reliable data(4) Goods for self-consumption-  Goods which are retained by the producer for personal consumption do not fetch money price, and are therefore excluded from the national income. (5) Double counting

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