1] National income is a macro-economic concept
National income is an outstanding example of macroeconomic analysis. It deals with “aggregate” or the “economy as a whole”. National income presents the picture of the overall performance of the economy as a whole in the course of time ie a year.
2] National income is a flow concept
National income is a flow of goods and services which are actually produced. It is a flow concept in the process of production, income generation and expenditure. It is expressed as
National product = National dividend = National expenditure
3] National income is a realized flow
National income is a realized flow of goods and services ie final goods and services which are actually produced.
4] National income includes all the goods and services produced in the economy
National income includes all the final goods and services produced in the economy ie consumer goods, producers goods and services of all kinds produced in the economy in the current year.
5] National income is the money valuation of goods and services
The value of goods and services produced in the economy, in the current year, is expressed in terms of their market price. This is measured annually.
6] National income includes the value of final [not intermediate] goods and services
National income includes the value of final goods and services only. In order to avoid double counting national income does not include the value of intermediate goods and services as it is already included in the value of final goods and services.
7] National income includes the value of economic/productive activity
National income includes the value of activities that are exchanged for money eg services of housewives are ignored.
8] National income is the net aggregate value
National income is the net/actual aggregate value of goods and services produced in the economy. Therefore the value of depreciation ie “wear and tear of capital” in the process of production is deducted from the gross value.
9] Net income from abroad is included
While calculating national income the net income from international trade is included ie from exports and imports and from receipts and payments from foreign trade and foreign transactions.
10] Transfer incomes are ignored
In order to avoid double counting transfer incomes like old age pension, unemployment benefits, scholarships etc are ignored in calculation of national income.
11] Indirect taxes are deducted while calculating national income
National income is expressed at market price which is inclusive of indirect taxes. Indirect taxes are a transfer of money from the consumers through the producers to the government. In order to avoid double counting indirect taxes are deducted from national income at market prices.
12] Subsidies are added while calculating national income
National income is expressed at market price which does not include subsidies. Subsidies are a transfer of money from the government through the producers to the consumers. In order to calculate national income accurately subsidies are added to national income at market prices.
13] National income is a mathematical expression
NI = NI(mp) – IT +S.
14] Financial Year
National income is always expressed with reference to a time period, in India the financial year, ie 1st April to 31st March every year.