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Hindi MediumCourseEconomyNational Income
18 Jun 2025Β·3 min readΒ·

National Income

National Income refers to the total money value of all final goods and services produced within a country during a financial year.

It is an important indicator of a country's economic development, standard of living, and economic performance.
It is usually measured in terms of Net National Product at Factor Cost (NNPFC).
PYQ (BPSC 65th): What does National Income measure? β†’ Total value of goods and services produced in a year

Key Concepts of National Income

1. Gross Domestic Product (GDP)
Refers to the total market value of all final goods and services produced within a country's borders.
Includes income generated by both residents and foreigners within the country.
It does not include income earned abroad.

2. Gross National Product (GNP)
GNP = GDP + Net Factor Income from Abroad (NFIA)
Represents the total income earned by the nationals of a country, regardless of where they are located.

3. Net Domestic Product (NDP)
NDP = GDP – Depreciation
Depreciation refers to wear and tear of capital assets.

4. Net National Product (NNP)
NNP = GNP – Depreciation
When measured at factor cost, NNP is called National Income.

5. Per Capita Income
Per Capita Income = National Income Γ· Total Population
Measures the average income of a citizen in the country.
PYQ (BPSC 66th): What is National Income at factor cost? β†’ NNP at factor cost

Methods of Measuring National Income

1. Production Method (Value Added Method)
Adds the value of output from all sectors: agriculture, industry, and services.
Formula: Gross Value of Output – Intermediate Consumption

2. Income Method
Adds all incomes: wages, rent, interest, profits, and mixed income.
Formula: NI = Compensation of Employees + Rent + Interest + Profits + Mixed Income

3. Expenditure Method
Adds final expenditures on goods and services.
Formula: NI = C + I + G + (X – M)
C = Consumption, I = Investment, G = Government Expenditure, X = Exports, M = Imports

PYQ (CDPO 2022): Methods of National Income estimation β†’ Production, Income, Expenditure

Current Trends in India’s National Income (2023–24)

  • GDP Growth Rate: 7.3% (Economic Survey 2023–24)
  • Per Capita Income: β‚Ή1.96 lakh
  • Sectoral Contribution:
    • Services Sector: ~54%
    • Industry: ~29%
    • Agriculture: ~17%

PYQ (BPSC 66th): Which sector contributes most to GDP? β†’ Services

Bihar-Specific Insights on National Income

  • GSDP Growth (2023–24): ~8.9% (faster than national average)
  • Per Capita Income (Bihar): ~β‚Ή54,383 (lowest among Indian states)
  • Sectoral Composition:
    • Agriculture: ~23% (much higher than national average)
    • Services: ~59%
    • Industry: ~18%

Key challenges:

  • High dependency on agriculture
  • Low industrial output
  • Migration-driven income fluctuations

Bihar has adopted Outcome Budgeting to better link schemes to development outputs.

PYQ (BPSC 67th Prelims): Bihar's per capita income is among the lowest in India. β†’ True

Related Concepts

  • Nominal GDP: Measured at current market prices, includes inflation.
  • Real GDP: Measured at constant prices, adjusted for inflation.
  • Green GDP: GDP minus environmental degradation and resource depletion.
  • Disposable Income: Personal income after deducting direct taxes.
  • GDP Deflator = (Nominal GDP Γ· Real GDP) Γ— 100

Limitations of National Income as a Measure

  • Excludes unpaid domestic labor, black money, and informal sector incomes.
  • Ignores income inequality.
  • Does not account for environmental loss and resource depletion.
  • Overlooks quality of life, education, and health indicators.

PYQs from BPSC

  • BPSC 65th: What is Per Capita Income? β†’ National Income Γ· Population
  • BPSC 66th: What is GDP? β†’ Total production within India's borders
  • CDPO 2022: What are the three methods of National Income estimation? β†’ Income, Production, Expenditure
  • DPRO 2020: What is the base year for National Income estimation in India? β†’ 2011–12

Quick Revision Points

  • GDP = Domestic production (includes foreigners)
  • GNP = GDP + Net income from abroad
  • NNP = GNP – Depreciation = National Income
  • Per Capita Income = NI Γ· Population
  • Base Year: 2011–12 (as of 2023–24)
  • India’s 2023–24 GDP Growth: 7.3%
  • Bihar’s Per Capita Income: β‚Ή54,383
  • Bihar GSDP Growth: ~8.9% (2023–24)

Sources Used

  • NCERT Class 12 – Macroeconomics Chapter 2
  • Economic Survey 2023–24 – Ministry of Finance
  • PIB Highlights
  • Lucent GK – Economy
  • Drishti Bihar Special Book
  • Ghatna Chakra PYQs – BPSC/DPCS
  • Bihar Economic Survey 2023–24 (Planning & Development Dept.)

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