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National Income Accounting, primarily measured by GDP, quantifies a country's economic activity and was developed by Simon Kuznets in the 1930s. In India, GDP is calculated by the National Statistical Office and reflects economic performance within the country's borders, while GNP accounts for the economic contributions of nationals globally. The document also discusses the differences between Nominal and Real GDP, the importance of base year revisions, and the frameworks used for economic data reporting.

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2 views

Daily Class Notes

National Income Accounting, primarily measured by GDP, quantifies a country's economic activity and was developed by Simon Kuznets in the 1930s. In India, GDP is calculated by the National Statistical Office and reflects economic performance within the country's borders, while GNP accounts for the economic contributions of nationals globally. The document also discusses the differences between Nominal and Real GDP, the importance of base year revisions, and the frameworks used for economic data reporting.

Uploaded by

Pushpendra 8009
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© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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‬

‭National Income Accounting‬

‭● ‭National Income Accounting measures a country’s economic activity, with‬‭GDP as its key
‭indicator.
‭● ‭Developed by Simon Kuznets in the 1930s‬‭, GDP calculates‬‭the total monetary value of
‭goods and services produced.
‭● ‭Adopted globally at the 1944 Bretton Woods Conference, GDP is used to assess economic
‭performance, guide policies, and compare nations’ economies.

‭Gross Domestic Product (GDP)‬‭is the total monetary‬‭value of all goods and services produced‬
‭within a country’s geographical boundaries during a specific period of time.‬

‭GDP in India‬

‭● ‭In India, GDP is calculated by the‬‭National Statistical‬‭Office (NSO)‬‭, which operates


‭under the‬‭Ministry of Statistics and Programme Implementation‬‭(MoSPI).
‭● ‭The GDP data is released on a‬‭quarterly basis‬‭by the‬‭Government of India.
‭● ‭GDP is a‬‭territory-specific concept,‬‭focusing solely‬‭on economic activity within the
‭country’s boundaries, regardless of the nationality of the producers.

‭This ensures GDP reflects the economic performance of the nation within its physical borders.‬

‭Gross National Product‬

‭● ‭Gross National Product (GNP) represents the‬‭total‬‭monetary value of all goods and
‭services produced by the nationals of a country,‬‭regardless‬‭of where they are located
‭globally, during a given period.

‭PW Web/App:‬‭https://smart.link/7wwosivoicgd4‬
‭●‬ ‭GNP‬‭focuses on the economic activities of a country’s citizens‬‭, whether they are within‬
‭or outside the country’s borders.‬
‭●‬ ‭GNP = GDP + NFIA,‬‭where NFIA (Net Factor Income from‬‭Abroad) accounts for the‬
‭difference between income earned by nationals abroad and income earned by foreign‬
‭residents within the country.‬
‭●‬ ‭This measure highlights the economic contributions of a nation’s citizens worldwide.‬

‭Nominal GDP and Real GDP‬

‭●‬ ‭Nominal GDP‬‭measures the total value of goods and‬‭services at current prices, including‬
‭inflation.‬
‭●‬ ‭Real GDP‬‭adjusts for inflation, measuring the value‬‭at constant base-year prices.‬

‭For example,‬

‭●‬ ‭Nominal GDP (Current Market Prices) for 2023-24: ₹295.35 lakh crore.‬

‭This reflects the actual market value of goods and services produced, influenced by inflation,‬
‭making it higher than Real GDP.‬

‭●‬ ‭Real GDP (Constant Market Prices, Base Year 2011-12) for 2023-24: ₹173.81 lakh crore.‬

‭This provides a more accurate representation of economic growth by removing the effects of price‬
‭changes (inflation or deflation).‬

‭Base Year‬

‭●‬ ‭The base year is a benchmark year used for inflation-adjusted calculations like Real GDP.‬

‭Importance of Base Year Revision:‬

‭●‬ ‭Reflects structural changes in the economy.‬


‭●‬ ‭Ensures accurate and updated macroeconomic data.‬
‭●‬ ‭Aids effective policy making .‬

‭Criteria:‬‭The base year must be a normal year, free‬‭from disruptions like global crises.‬

‭PW Web/App:‬‭https://smart.link/7wwosivoicgd4‬
‭India’s Upcoming Base Year Revision‬

‭●‬ ‭Current Base Year: 2011-12‬


‭●‬ ‭Proposed New Base Year: 2022-23‬
‭●‬ ‭Chosen as a stable period after the pandemic recovery.‬
‭●‬ ‭Expected to reflect current economic realities, including the digital economy, green energy,‬
‭and updated production methods.‬
‭●‬ ‭Timeline:‬‭Likely to be implemented in February 2026,‬‭as per the recommendation of the‬
‭Advisory Committee on National Accounts and Statistics.‬

‭The Government of India (GOI) follows internationally recognized standards for national‬
‭accounts and economic data reporting:‬

‭●‬ ‭UN System of National Accounts (SNA):‬‭For consistent‬‭and comparable economic data‬
‭compilation.‬
‭●‬ ‭IMF Special Data Dissemination Standards (SDDS):‬‭Ensures‬‭timely, accurate, and‬
‭transparent economic data for global comparison.‬

‭These frameworks enhance India’s economic reporting and global integration.‬

‭Base Price, Factor Cost and Market Price‬

‭●‬ ‭Factor Cost:‬‭The total cost of production, including‬‭wages, rent, interest, and profit.‬
‭●‬ ‭Base Price:‬‭The price at which a good is sold to a‬‭wholesaler or retailer, excluding taxes‬
‭and subsidies.‬
‭●‬ ‭Market Price:‬‭The final price paid by the consumer,‬‭including taxes and any applicable‬
‭subsidies.‬

‭For example:‬‭A farmer produces wheat at a‬‭factor cost‬‭of ₹10,000 per ton. He sells it to a miller‬
‭at a‬‭base price‬‭of ₹12,000 per ton. The miller processes‬‭it into flour and sells it to a retailer at a‬
‭higher price. The retailer then sells the flour to consumers at a‬‭market price‬‭of ₹13,200 per ton,‬
‭which includes a 10% tax.‬

‭PW Web/App:‬‭https://smart.link/7wwosivoicgd4‬
‭In India, GDP was previously calculated at factor cost, excluding taxes and subsidies. Now,‬
‭it is calculated at market prices, which includes taxes and excludes subsidies, providing a‬
‭more accurate reflection of economic activity.‬

‭PW Web/App:‬‭https://smart.link/7wwosivoicgd4‬

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