Difficulties in measuring national income
DIFFICULTIES IN MEASURING NATIONAL INCOME
1) Danger of Double counting:
While calculating N.l. by value added method we must consider the value of only final goods and services. But there are possibilities of considering the value of second hand sale of raw material etc. by mistake. In these cases it is very different to avoid double counting.
2) Conceptual difficulties:
National income is very broad concept. Therefore, it is very difficult to define what exactly should be included and excluded while measuring national income.
3) Unpaid services:
Values, of unpaid services are not counted due to the problem of getting exact value of the honorary service rendered. As these services are not included, there is underestimation of national income.
4) production for self consumption:
Many a times the amount kept for self consumption by the farmers and other producers is not accounted due to lack of correct information. It leads to underestimation of national income.
5) value of inventories:
It is very different to calculate the value of inventory like stock of raw material, stock of semi- finished goods, etc. And the value of even finished goods stocked.
6)Depreciation:
There is no standard rate of depreciation due to different types of capital assets. That's why a guess work has been included in the case.
7) International transaction:
It is very different to find out the exact value of imports and exports of individual items like services rendered by foreign tourist, travel agents, consultancy services for imports, exports, etc.
8) incomplete records:
In villa and even cities people do not maintain regular and complete record. That's why they are unable to provide detailed information.
9)Non- monitored sector:
In the rural areas, in agricultural sector goods are exchanged for goods among the farmers. It is difficult to know the correct market value of goods produced in agricultural sector.
10) Lack of systematic occupational classification:
People add income from main source or occupation and also from subsidiary occupation. Many a times income from subsidiary occupations is not taken into account. For e.g.: A farmer earns income from main occupation I.e. agriculture and also from the subsidiary occupation like rearing poultry,dairy, etc.
11) value of government services:
Value of government services through health education, defense, administrative services, etc. Can't be measured accurately because these services are either free or subsidized.
12) Indifference of the people:
When the statistical investigators approach the people for information,the people do not give correct and adequate information. It means they do not co-operate with the officials.
13) Untrained and incomplete staff:
Due to inefficient and untrained staff the government is not able to get accurate and timely information for measuring national income.
14) Lack of reliable information and data:
In India, the information regarding consumption, saving, expenditure, income, etc. given by the people are not correct and adequate. Therefore, the data given by the people cannot be relied upon.
15) Illegal income:
In India, there is a parallel, unaccounted (black money) money existing in the economy. It is very difficult to find out the exact amount of black money in circulation.
16) Income from illegal activities:
Income from illegal activities such as corruption, black marketing, extortion, robbery, etc. is not exactly known. Income from these illegal activities cannot be distinguished from legal income as illegal income is not revealed.
9)Non- monitored sector:
In the rural areas, in agricultural sector goods are exchanged for goods among the farmers. It is difficult to know the correct market value of goods produced in agricultural sector.
10) Lack of systematic occupational classification:
People add income from main source or occupation and also from subsidiary occupation. Many a times income from subsidiary occupations is not taken into account. For e.g.: A farmer earns income from main occupation I.e. agriculture and also from the subsidiary occupation like rearing poultry,dairy, etc.
11) value of government services:
Value of government services through health education, defense, administrative services, etc. Can't be measured accurately because these services are either free or subsidized.
12) Indifference of the people:
When the statistical investigators approach the people for information,the people do not give correct and adequate information. It means they do not co-operate with the officials.
13) Untrained and incomplete staff:
Due to inefficient and untrained staff the government is not able to get accurate and timely information for measuring national income.
14) Lack of reliable information and data:
In India, the information regarding consumption, saving, expenditure, income, etc. given by the people are not correct and adequate. Therefore, the data given by the people cannot be relied upon.
15) Illegal income:
In India, there is a parallel, unaccounted (black money) money existing in the economy. It is very difficult to find out the exact amount of black money in circulation.
16) Income from illegal activities:
Income from illegal activities such as corruption, black marketing, extortion, robbery, etc. is not exactly known. Income from these illegal activities cannot be distinguished from legal income as illegal income is not revealed.
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