The chief purpose of estimating national income is that it describes the structure of the economy and the composition of its aggregate income, its origin and its distribution. If such estimates are regularly computed year after year, we can assess the trends in the country's economic development and analyse the factors responsible for a particular trend. On the basis of such data, government could formulate policies to improve economic conditions rather than frame such policies purely on the basis of guess-work. Such studies of national income help in making comparisons of output and standards of living not only between different countries but in the same country at different points of time. We can ascertain how the distribution of total output changes over history and whether such distribution is more equitable than before or not. It not only gives us a statistical estimate of the value of aggregate goods and services over a period of time, but tells us how it gets distributed between goods for consumption and goods that add to wealth or investment. Such investment indicates that commodities are reserved for future consumption. National Income estimates help us to know if the purchasing power or the value of money used in the country is rising or falling. They also give an indication of what the future levels of economic activity are likely to be. Thus we can compare and analyse changes in output, income and expenditure of various sectors as well as the economy as a whole over a period of time.
The money value of all the products and services produced in an economy during a year is known as national income. The concept of the national income can be analyzed from the fact that household income shows the financial health of a household. Similarly, the national income shows the health of the economy. National income shows the progress which the country has achieved over the years. It is considered very important because it is used to estimate the economic development. It helps the country to understand how much development objectives have been achieved. Moreover, it determines the contributions of various sectors in the national income.