History of National Income calculation


The history of the national accounts is relatively recent but falls under the long statistical tradition which started with the population censuses. The political authorities sought to evaluate their principal wealth, the source of their power, i.e. the people which live on their territories.

These population censuses were then followed by surveys on prices, on foreign trade and on production of some strategic goods.

In 1665, William Petty carried out the first estimates of the national income and wealth of England.

In 1696, still in England, Gregory King carried out an integrated statistics system which can be regarded as an ancestor of national accounts.

In France, Vauban carried out studies aiming to measure the national income, but Quesnay can really be considered as the main precursor of the national accounts. The structure of his economic Table of 1758 was very similar to the current practices of national accounts, showing in particular the interactions between the sectors of the economy.

All these works have the common characteristic to be closely connected to government concerns, generally for tax purposes, sometimes for strategic analysis since the works of William Petty and Gregory King aimed to compare the capacity of England, Holland and France to support a war effort.

But these works were criticised for their unreliability, so that they remain without consequence until the 20th century.

The original motivation for the development of national accounts and the systematic measurement of employment was the need for accurate measures of aggregate economic activity [due to the great depression]. The first efforts to develop such measures were undertaken in the late 1920’s and 1930’s, notably by Colin Clark and Simon Kuznets.

Richard Stone of U K led later contributions during World War II and thereafter.

The first national system of accounts was implemented after the Second World War. For the first time the three conditions necessary for the birth of the national accounts were satisfied:

  • 1. a political will of governments, which wished to have tools enabling them to intervene effectively in national economic life;
  • 2. an economic theory sufficiently dominant to impose its concepts;
  • 3. efficient statistical offices.

In 1941, in Great Britain, R. Stone and J. Meade proposed in a White Paper, an articulated system of accounts.

The same year, J. Tinbergen carried out the first system for the Netherlands.

In France, A. Vincent realized the first theoretical work and the first accounts, covering 1938, were carried out in 1945 in the Institute of economic situation by Mr Froment.

Thereafter, a team of the General Commission of the Plan formed of Dumontier, Froment, Gavannier and Uri was instructed to work out the accounts.

The first formal national accounts were published by the United States in 1947.

After the first works, the national accounts developed differently in each country. In the aim of standardisation, the UN adopted in 1950 a system which had vocation to serve as a base to the accounts of all the countries. However it has not been adopted everywhere, so that, schematically, it was possible to distinguish three large schools of accounts to coming out of the 1950s:

  • 1. the Anglo-Saxon school, of liberal inspiration which was satisfied with light accounts;
  • 2. the Soviet school which adopted a very heavy account system adapted to its very specific type of centralised planning;
  • 3. the French school which, to meet the needs of planning, had created an original system, intermediary between the Anglo-Saxon system and the Soviet system. Many European countries followed shortly thereafter, and the United States published, “A System of National Accounts and Supporting Tables” in 1952.

Many European countries followed shortly thereafter, and the United States published, “A System of National Accounts and Supporting Tables” in 1952.

The work of harmonisation at the international level continued however under the aegis of the United Nations so that in 1970 the UN published the methodological document of the System of National Accounts (SNA) from which the European System of Accounts is derived (ESA 1979). These systems were in fact a synthesis of the Anglo-Saxon and French systems. This is applied by members of the European Union and many other European countries.

International standards for national accounting are defined by the United States System of National Accounts, with the most recent version released for 2008.

Research on the subject continues from its beginnings through today.

Calculation of National Income of India: A Brief History
National income committee of India defines national income as, “the value of commodities and services in an economy during a given period, counted without duplication”

Pre-independence estimates of national income

Since there was no official body in India to prepare national income estimates before independence, it was prepared by some eminent personalities in their personal capacity.

The first attempt to calculate National Income of India was made by Dadabhai Naoroji in 1876. He estimated national income by first estimating the value of agricultural production and then adding a certain percentage as non-agricultural production. This was however a non scientific method.

The first person to adopt a scientific procedure in estimating national income was Dr.V.K.R.V.Rao In 1931. He divided the Indian economy into two parts

1] Agricultural sector which included agriculture, forests, fishing and hunting.

2] Corporate sector which included industries, construction, business, transport and public services.

He used Product method to calculate national income in the agricultural sector and income method to calculate national income in the corporate sector. Finally net income earned from abroad was added to obtain national income.

Post-independence estimates of national income

The first official attempt was made by Prof.P.C.Mahalnobis .

The Government of India appointed the “National Income Committee” in 1949 under the chairmanship of Prof P C Mahalonobis, and other members were Prof D R Gadgil and Dr V K R V Rao.

The first report of the committee was presented in 1951 according to which India’s national income for the year 1948-49 was Rs 8,710 crores and per capita income was Rs 225/-

Since 1955 the national income estimates are being prepared by the “Central Sattistical Organisation”  [CSO]. It has divided the Indian economy into three sectors

1] Primary sector including agriculture, forestry, mining and quarrying.

2] Secondary sector including manufacturing, power generation, gas and water supply.

3] Tertiary sector including transport, communication and trade, banking, insurance, public administration, defense and external trade.

A combination of Product, income and expenditure method to calculate national income.



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