State any three precautions to be taken while estimating national income by income method. On the basis of the given data, estimate the value of National Income :

Question

Accepted Answer

Using Expenditure Method:
GDP_MP = PFCE + GFCE + GDCF + Net Exports
From table: PFCE = 300, GFCE = 200, GFCF = 80, Net Exports = -20, Change in Stock = 20
GDCF = 80 + 20 = 100
GDP_MP = 300 + 200 + 100 + (-20) = 580
Depreciation = 15, NIT = 60 - 15 = 45
NDP_FC = 580 - 15 - 45 = 520
NNP_FC = 520 + (-40) = Rs. 480 crore

National Income = Rs. 480 crore

Precautions for Income Method:
1. Do not include transfer incomes (scholarships, pensions) as they are not earned through productive activity.
2. Do not include income from second-hand goods as it was counted in original year.
3. Do not include capital gains as they do not add to current flow of goods and services.