Concept of National Income:

National Income (NI) is the total income earned by the citizens of a country in the form of wages, profits, rents, and interest. It includes the value of all final goods and services produced within the nation’s borders over a given period, typically a year.

National income helps measure the economic activity of a country, including:

• The total output of goods and services produced.
• The income earned by citizens, both domestically and from abroad.
• The economic well-being of a country.

Types of National Income:

1. Gross Domestic Product (GDP) / Gross National Income (GNI) :

   • Definition: GDP is the total monetary value of all final goods and services produced within a country’s borders in a specific time period.
   • Formula: GDP = C + I + G + (X – M)
     • C: Consumption expenditure (private sector spending on goods and services)
     • I: Investment expenditure (spending on capital goods)
     • G: Government spending (expenditures by the government on goods and services)
     • X: Exports (foreign purchases of domestic goods)
     • M: Imports (domestic purchases of foreign goods)
   • Example: The total value of all cars, computers, food products, and other goods produced in India in a year.

2. Gross National Product (GNP):

   • Definition: GNP is the total value of goods and services produced by the citizens of a country, regardless of whether the production occurs within the country or abroad.
   • Formula: GNP = GDP + Net Factor Income from Abroad (NFIA)
   • Therefore, GDP = GNP – NFIA
     • NFIA: The difference between income earned by residents from abroad and income earned by non-residents from within the country.
   • Example: If an Indian company operates in the US, the profit generated would be included in India’s GNP, but not in India’s GDP.

3. Net National Product (NNP):

   • Definition: NNP is the GNP adjusted for depreciation (capital consumption). It represents the net value of all goods and services produced after accounting for the wear and tear on capital goods.
   • Formula: NNP = GNP – Depreciation
   • Example: The value of goods and services produced by Indian citizens, after subtracting the depreciation of machinery, buildings, and infrastructure used in production.
4. Net Domestic Product (NDP)
   • Net Domestic Product (NDP) = NNP less Net Income from Abroad

5. Personal Income (PI):

   • Definition: Personal Income refers to the total income received by individuals and households in a country. It includes wages, profits, rents, and transfer payments.
   • Formula: PI = National Income – Corporate Taxes – Retained Earnings + Transfer Payments
   • Example: The income an average Indian family receives, including wages, interest, and government transfer payments (like pensions or unemployment benefits).

6. Disposable Income (DI):

   • Definition: Disposable Income is the amount of money households have left after paying taxes. It is the income available for consumption and saving.
   • Formula: DI = Personal Income – Personal Taxes
   • Example: After paying income tax, the money left for an individual to spend or save.