There are 3 methods to calculate the National income.These methods are given by Simon Kuznets.
- PM (Product Method) or Product service method.
- IM (Income Method)
- CM (Consumption Method) or expenditure method.
In India the combination of Product method and Income methods is used for calculating the National Income.
PRODUCT METHOD:
NI = GDP – income earned in foreign countries – Depreciation.
In the Product method the GDP is taken into consideration.Net income earned in foreign countries is deducted from the GDP.From this the depreciation is subtracted.
INCOME METHOD:
In this method the National Income is calculated by
National Income = Total Rent Plus (+) Total wages Plus (+) Total Interest Plus (+) Total Profit.
The total net income of the people working in different sectors and commercial sectors are taken into consideration.
Consumption Method:
This method is not generally used for calculating the National income.According to this method
- National Income =Total Consumption Plus Total Savings
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