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INDIAN ECONOMY ( ZIA SIR ) > 7.National Income Accounting and Aggregates-II > Flashcards

7.National Income Accounting and Aggregates-II Flashcards

1
Q

What is gross value added (GVA)?

A

GVA is defined as the value of output minus the value of intermediate consumption. It is the measure of contribution to growth made by the individual, industrialists, producers, and sectors.

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2
Q

What is the difference between GVA and GDP?

A

GDP is the total value of goods and services produced in an economy, while GVA is the value of goods and services produced in an economy minus the value of intermediate consumption.

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3
Q

What is the formula for GVA at factor cost?

A

GVA at factor cost = GDP + Subsidies on products – Taxes on products

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4
Q

What is the formula for GVA at basic prices?

A

GVA at basic prices = GVA at factor cost + Taxes on production – Subsidies on production

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5
Q

What is Gross Value Added (GVA)?

A

Gross Value Added is the value of output minus the value of intermediate consumption, representing the contribution to growth from individuals, industrialists, producers, and sectors.

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6
Q

How is GVA @ Factor Cost calculated?

A

GVA @ Factor Cost = GDP + Subsidies on products - Taxes on products.

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7
Q

What are the eight sectors of the economy that are used to classify GVA data?

A

The eight sectors of the economy that are used to classify GVA data are:

  • Agriculture, forestry, and fishing
  • Mining and quarrying
  • Manufacturing
  • Electricity, gas, water supply, and other utility services
  • Construction
  • Trade, hotels, transport, communication, and services related to broadcasting
  • Financial, real estate, and professional services
  • Public administration, defense, and other services
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8
Q

Why is GVA important?

A

GVA is important because it is a measure of the productivity of an economy. It also helps to identify the sectors of the economy that are growing and the sectors that are lagging behind.

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9
Q

What is the significance of GVA @ Basic Prices in GDP calculation?

A

GVA @ Basic Prices forms the basis for calculating GDP after 2015. It includes production taxes and excludes production subsidies.

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10
Q

How is GDP calculated from GVA @ Basic Prices?

A

GDP = GVA + Taxes earned by Government - Subsidies provided by Government. GDP is now derived from GVA @ Basic Prices.

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11
Q

How is GVA calculated?

A

GVA is calculated by the National Statistical Office (NSO) based on data from a variety of sources, including the Annual Survey of Industries (ASI) and the Ministry of Corporate Affairs (MCA21) database.

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12
Q

How does GVA help policy makers?

A

GVA helps policy makers to make decisions about economic policy. For example, if a sector of the economy is growing rapidly, policy makers may decide to invest in that sector.

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13
Q

Who provides estimates of GVA output?

A

The National Statistical Office (NSO) provides estimates of GVA output.

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14
Q

How is the data classified in sectoral breakdown by GVA?

A

The data is classified into eight broad sectors or categories, encompassing goods produced and services provided.

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15
Q

What are the limitations of GVA?

A

GVA has some limitations as a measure of economic growth. For example, it does not take into account the depreciation of capital goods.

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16
Q

How can GVA be improved?

A

GVA can be improved by taking into account the depreciation of capital goods and other factors that affect economic growth.

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17
Q

What are the eight sectors/categories provided by GVA?

A

The eight sectors/categories are:

Agriculture, Forestry and Fishing
Mining and Quarrying
Manufacturing
Electricity, Gas, Water supply, and Other Utility Services
Construction
Trade, Hotels, Transport, Communication, and Services related to Broadcasting
Financial, Real Estate, and Professional Services
Public Administration, Defence, and Other Services

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18
Q

How does sector wise GVA breakdown aid policymakers?

A

A sector-wise GVA breakdown helps policymakers identify sectors that need incentives or stimulus, allowing them to formulate sector-specific policies accordingly.

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19
Q

What is national income?

A

National income is the total factor income earned by all the normal residents of a country during a financial year.

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20
Q

What are the two methods of national income computation?

A

The two methods of national income computation are the income method and the expenditure method.

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21
Q

What is National Income?

A

National Income refers to the total factor income earned by all normal residents of a country within a financial year.

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22
Q

How can National Income be expressed?

A

National Income can be expressed in terms of income, the value of final goods and services, or in terms of expenditure on final goods and services.

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23
Q

What is the income method?

A

The income method is based on the concept of factor income. It sums up the income earned by all the factors of production, namely land, labor, capital, and entrepreneurship.

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24
Q

What is the expenditure method?

A

The expenditure method is based on the concept of aggregate demand. It sums up the expenditure incurred by all the economic agents in the economy, namely households, firms, and the government.

25
Q

Explain the Income Method of National Income computation.

A

The Income Method sums up factor incomes like rent, wages, interest, and profit earned from factors of production. It includes Net Factor Income from Abroad to calculate Net National Product at factor cost.

26
Q

What is the Expenditure Method of National Income computation?

A

The Expenditure Method calculates National Income as the sum of Consumption Expenditure (C), Investment Expenditure (I), Government Expenditure (G), and net exports (X - M), also known as Aggregate Demand.

27
Q

What are the issues with national income computation?

A

The issues with national income computation include:

  • Non-availability of reliable data
  • Unorganized sectors are not included
  • Non-market activities are not included
  • Black money
  • Capital gains are not included
  • Second-hand goods purchase or sale are not included
  • Household works done by women
28
Q

What is the difference between national income and gross domestic product (GDP)?

A

National income is the total factor income earned by all the normal residents of a country during a financial year, while GDP is the total value of goods and services produced within the domestic territory of a country during a financial year.

29
Q

What are some issues with National Income computation?

A

Issues include non-availability of reliable data, exclusion of unorganized sectors, non-market activities, black money, capital gains, second-hand goods transactions, and unaccounted household work.

30
Q

What does C represent in the Expenditure Method?

A

C represents Consumption Expenditure on consumption goods.

31
Q

How is Gross Domestic Product (GDP) calculated using the Expenditure Method?

A

GDP is calculated as the sum of Consumption Expenditure (C), Investment Expenditure (I), Government Expenditure (G), and net exports (X - M).

32
Q

What is Net Factor Income from Abroad?

A

Net Factor Income from Abroad is the difference between the income earned by the country’s residents from abroad and the income earned by foreign residents within the country.

33
Q

What is the difference between net national product (NNP) and national income?

A

NNP is the national income minus depreciation. Depreciation is the loss in value of capital goods over time due to wear and tear.

34
Q

What is the difference between gross national product (GNP) and national income?

A

GNP is the national income plus net factor income from abroad. Net factor income from abroad is the income earned by the residents of a country from abroad minus the income earned by foreigners from within the country.

35
Q

What is Aggregate Demand?

A

Aggregate Demand is the total spending on goods and services within an economy, including Consumption Expenditure, Investment Expenditure, Government Expenditure, and net exports.

36
Q

What are some examples of factors not included in National Income computation?

A

Some examples are non-market activities like mutual understanding works, black money, capital gains, second-hand goods transactions, and household works done by women.

37
Q

What is the difference between GDP at market price and GDP at factor cost?

A

GDP at market price is the total value of goods and services produced within the domestic territory of a country at market prices, while GDP at factor cost is the total value of goods and services produced within the domestic territory of a country at factor prices.

38
Q

What is the difference between nominal GDP and real GDP?

A

Nominal GDP is the GDP at current prices, while real GDP is the GDP at constant prices. Constant prices are the prices of a base year.

39
Q

Who estimated the first national income of India and in which year?

A

Dada Bhai Naoroji estimated the first national income of India in 1867-68 in his book ‘Poverty and Un British Rule in India’.

40
Q

When were the first scientific estimates of national income done?

A

Professor V.K.R.V Rao conducted the first scientific estimates of national income in 1931-32.

41
Q

What is private income?

A

Private income is the income earned by the private sector. It is calculated from NNP at factor cost by making certain additions and deductions.

42
Q

What are the additions to private income?

A

The additions to private income are transfer payments such as pension, unemployment allowances, sickness allowances, etc., gifts and remittances from abroad and interest on public debt.

43
Q

Which organization is responsible for estimating national income in India since 1956?

A

The Central Statistical Office (CSO), which is now merged into the National Statistical Office (NSO), is responsible for estimating national income since 1956.

44
Q

What is private income?

A

Private income is the income earned by the private sector, including earned and unearned income.

45
Q

How is private income calculated?

A

Private income is calculated from Net National Product (NNP) at factor cost by adding transfer payments, gifts, and remittances, while deducting interest on public debt and employee contributions to social security.

46
Q

What is included in the additions while calculating private income?

A

Additions include transfer payments, gifts, remittances, and interest on public debt.

47
Q

What are the deductions from private income?

A

The deductions from private income are income from government departments as well as surpluses from public undertakings and Employees contribution to the social security schemes like provident fund and life insurance etc.

48
Q

What is the difference between private income and personal income?

A

Personal income is a part of national income that is actually received by the household. It is calculated by subtracting undistributed corporate profits and taxes on profits from private income.

49
Q

What are the components of personal income?

A

The components of personal income are:

  • Wages and salaries
  • Rent
  • Interest
  • Dividends
  • Profits
  • Transfer payments
50
Q

Who are the recipients of personal income?

A

The recipients of personal income are the individuals of a country. They include:

  • Wage earners
  • Salaried employees
  • Rentiers
  • Shareholders
  • Profit earners
  • Recipients of transfer payments
51
Q

What is included in the deductions while calculating private income?

A

Deductions include income from government departments, surpluses from public undertakings, and employee contributions to social security.

52
Q

What is personal income?

A

Personal income is the portion of national income that households actually receive before payment of direct taxes in a year.

53
Q

What is the importance of personal income?

A

Personal income is an important indicator of the well-being of the people in a country. It is used to measure the standard of living and to assess the distribution of income.

54
Q

How is personal income calculated?

A

Personal income is calculated by the National Statistical Office (NSO) based on data from a variety of sources, including the National Income Accounts, the Consumer Expenditure Survey, and the Income Tax Returns.

55
Q

What is the formula for personal income?

A

Personal Income = Private Income - Undistributed Corporate Profits - Tax on Profit

56
Q

How does personal income differ from national income?

A

Personal income is a subset of national income that reflects the income actually received by individuals after deductions for taxes and other factors.

57
Q

What are the limitations of personal income?

A

Personal income has some limitations as an indicator of the well-being of the people in a country. These limitations include:

  • It does not take into account the non-monetary benefits that people receive, such as free education and healthcare.
  • It does not take into account the inequality of income distribution.
  • It does not take into account the under-reporting of income.
58
Q

How can personal income be improved as an indicator of the well-being of the people in a country?

A

Personal income can be improved as an indicator of the well-being of the people in a country by taking into account the non-monetary benefits that people receive, by addressing the inequality of income distribution, and by reducing the under-reporting of income.

INDIAN ECONOMY ( ZIA SIR ) (10 decks)

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