International Journal of Humanities Social Science and Management (IJHSSM)

Volume 4, Issue 2, Mar.-Apr., 2024, pp: 1548-1560 www.ijhssm.org

The Concept of National Income and its Application on the

Indian Economy
Puneet Rawlley
NMIMS University, Mumbai, Maharashtra

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Date of Submission: 11-04-2024 Date of Acceptance: 25-04-2024
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Abstract Various approaches can be used to compute

One of the important tools for assessing the national income namely expenditure approach;
economic health and performance of a country is income approach and production approach. All
measurement and analysis of national income. This these methods look at different dimensions of
project aims to provide an understanding of economic activity hence providing overall picture
national income, exploring its various concepts of the economy suitable to economists and policy
methods of calculation, and significance in makers.
economic policymaking. Relevance of tracking national income over time
The project begins by describing the fundamental allows for the analysis:
concepts of national income measurement, ● Measure of Economic Growth: National
including Gross Domestic Product (GDP), Gross income provides a measure of the total output of
National Product (GNP) and Net National Product goods and services produced within an economy
(NNP). over a specific period, typically a year. Changes in
Moreover, the project explores the significance of national income over time indicate the rate of
national income statistics in guiding economic economic growth, allowing policymakers,
policy formulation and evaluation. The project also businesses, and individuals to assess the pace of
talks about the methods employed in computing economic expansion or contraction.
national income including the production approach
and expenditure approach. It examines the data ● Standard of Living: National income per
sources, the relevance and the limitations or capita, which is national income divided by the
challenges involved in estimating national income. population, is often used as a proxy for the
The project also includes crucial measures like standard of living within a country. Higher national
disposable income, purchasing power parity and income per capita generally correlates with higher
per capita income which shows more accurate levels of consumption, better access to goods and
picture of how economy is doing for the typical services, and an improved quality of life for
citizen by accounting for population size and citizens.
wealth distribution. It also includes the calculation ● Resource Allocation: National income
of nominal and real GDP, where even the reason data helps in the allocation of resources within an
for discrepancies have been explained briefly. economy. By identifying sectors that contribute the
Lastly, one case study is included which gives an most to national income, policymakers can make
overview on how policies, strategies, exports, etc., informed decisions about resource allocation,
have affected the GDP trend and growth. investment priorities, and economic development
strategies.
I. Introduction and Methodology
National income is an important concept in ● International Comparisons: National
economics, and it is the way to measure the income calculations facilitate comparisons of
economic performance and condition of a nation. It economic performance between countries. Metrics
signifies the sum total of all goods and services such as Gross Domestic Product (GDP) or Gross
generated within a country’s boundaries for a National Income (GNI) allow policymakers,
given year. The process of national income starts investors, and analysts to assess the relative
with appreciating its different constituents like economic strength and competitiveness of different
wages, profits, rents, taxes which sum up to nations.
constitute national product.

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Calculating national income involves various businesses and households.

methods, each offering a unique perspective on c. Government Spending (G): All expenditures
economic activity within a country. The three made by the government on goods and services,
primary methods used are the, production including salaries, infrastructure, and public
approach, income approach, and expenditure services.
approach. Here's a brief overview of each: d. Net Exports (NX): The difference between
exports (goods and services sold to other countries)
1. Production Approach: Also known as the and imports (goods and services purchased from
value-added approach, this method calculates other countries).
national income by summing up the value added at The formula for calculating national income using
each stage of production within an economy It the expenditure approach is:
avoids double counting by just looking at the value
added in every step. The formula for calculating National Income = Consumption (C) + Investment
national income using the production approach is: (1) + Government Spending (G) + Net Exports (X-
National Income = Value Added in Agriculture + M)
Value Added in Industry + Value Added in
Services 1.1 Assumptions and Limitations
The value added in each sector is calculated by
subtracting the cost of intermediate goods and In economics, the measurement of national income
services from the total output of that sector. involves several assumptions to simplify the
complex reality of an economy. These assumptions
2. Income Approach: This method help in standardizing the calculation process and
calculates national income by summing up all making comparisons over time or between
income earned by factors of production within an different countries. Here are some key assumptions
economy. The key components of the income commonly made in the estimation of national
approach are: income:
● Homogeneity of Goods and Services: It
a. Wages and Salaries (W): Income earned by
assumes that goods and services produced within
labour for their work.
an economy are homogeneous or identical. This
b. Profits (P): Income earned by businesses after
allows for aggregation of various economic
deducting expenses from revenues.
activities into broader categories without
c. Interest (1): Income earned by individuals and
considering differences in quality or
businesses from lending or investing money.
characteristics.
d. Rent (R): Income earned by individuals or
businesses from owning land or other natural ● Perfect Competition: National income
resources. calculations often assume a state of perfect
e. Taxes (T): Subtracting taxes paid by households competition, where there are many buyers and
and businesses. sellers in the market, and no single entity can
influence prices. This assumption simplifies the
The formula for calculating national income using determination of market prices and ensures that the
the income approach is: value of goods and services reflects their true
economic worth.
National Income = Wages and Salaries (W) +
● Factor Mobility: It assumes that factors of
Profits (P) + Interest (1) + Rent (R) - Taxes (T) production, such as labour and capital, can move
freely between industries and regions within an
3. Expenditure Approach: This method economy. This assumption ensures that resources
calculates national income by summing up all are allocated efficiently to maximize production
expenditures made on final goods and services and minimize costs.
within an economy during a specific time period,
typically a year. The key components of the ● No Income Generated Outside the
expenditure approach are: Country: National income calculations typically
a. Consumption (C): Total expenditures by focus on income generated within the borders of a
households on goods and services. country and do not account for income earned by
b. Investment (1): Spending on capital goods, such residents from foreign sources (e.g., remittances,
as machinery, equipment, and construction, by foreign investments). However, such income is

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often included in broader measures like Gross 7. Ignores Changes in Productivity: National
National Income (GNI) or Gross National Product income does not account for changes in
(GNP). productivity or improvements in technology that
may affect the efficiency of production. As a
While national income is a valuable economic result, changes in national income may not
indicator, it also has several limitations that need to accurately reflect changes in economic well-being
be considered when interpreting its significance. or standards of living over time.
Here are some key limitations of national income: 8. Currency Fluctuations: National income
1. Excludes Non-Market Transactions: calculations are typically done using a single
National income typically measures only market currency, which may not accurately reflect the
transactions, excluding non-market activities such purchasing power of that currency due to
as household work, volunteer services, and fluctuations in exchange rates. This can distort
informal sector activities. As a result, it may not comparisons of national income between countries
fully capture the overall economic activity within a and over time.
country, leading to an underestimation of the true
economic output. Overall, while national income is a valuable
2. Ignores Distributional Issues: National measure of economic activity, it should be
income aggregates the total output of an economy interpreted alongside other indicators and
without considering how income is distributed supplemented with additional data to provide a
among different segments of the population. As a more comprehensive understanding of economic
result, it may mask income inequality and performance and societal well-being.
disparities in wealth distribution, providing an
incomplete picture of the economic well-being of II. Calculation of National Income of India
citizens. Various measures are used to estimate the
3. Doesn't Account for Externalities: aggregate economic activity in a country, mainly
National income calculations often ignore the GDP, GNP, NDP and NNP. GDP is one of the
external costs and benefits associated with most vital macroeconomic variables and one of the
economic activities, such as environmental best measures to review an economy’ performance.
degradation, pollution, and social impacts. Failure Nominal GDP or Gross Domestic Product
to account for these externalities can lead to at Current Prices in the year 2022-23 is estimated
overestimation of economic welfare and at Rs. 272.04 lakh crore, compared to the First
sustainability. Revised Estimates of GDP of the year 2021-22 at
4. Quality of Life Indicators: National Rs. 234.71 lakh crore. The growth of nominal GDP
income alone does not capture important aspects of during the year 2022-23 is estimated at 15.9% as
well-being and quality of life, such as health compared to 18.4% in 2021-22.
outcomes, education levels, social cohesion, and The three approaches used to calculate the
personal happiness. While economic growth may GDP are the output approach, the income approach
increase national income, it does not necessarily and the expenditure approach. Theoretically, the
translate into improvements in overall quality of three approaches must produce the same result
life for all citizens. because the total expenditures on goods and
5. Ignores Household Production: National services (Gross National Expenditure) must be
income calculations typically exclude household equal to the total income paid out to the producers
production, such as self-consumption of home- (Gross National Income), and that must also be
grown food, childcare, and home repairs. This equal to the total value of the output of goods and
omission can lead to underestimation of economic services (Gross National Production). However, in
output, particularly in economies where household real life difference might arise in the results of the
production is significant. three methods, majorly due to statistical
6. Ignores Income Distribution: While discrepancies, limited data availability and
national income provides an aggregate measure of measurement errors. These methods rely on
economic output, it does not reveal how income is different data sources and assumptions.
distributed among different groups within a
society. Rising national income may benefit certain a. Output Approach
segments of the population disproportionately, This method measures national income at the
exacerbating income inequality. production stage. The stages involved are:

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i) Estimation of Gross Value of the Quarrying), Secondary sector (comprising

domestic product Manufacturing, Electricity, Gas, Water Supply &
ii) Estimation of Intermediate Cost Other Utility Services, and Construction) and
iii) Estimation of Net Value of domestic Tertiary sector (Services) have been estimated as
product 3.9%, 12% and 8.8% respectively in 2021-22 as
compared to a growth of 2.4%, -0.2% and -8.2%,
For the year 2022-23, Gross Value Added (at respectively, in the previous year.
Current Prices) is Rs. 2,47,07,001 crore. This The growth in real Gross Value Added during
includes the industries of Agriculture, Forest & 2021-22 is due to growth in Mining and Quarrying,
Fishing, Mining and Quarrying, Manufacturing, Manufacturing, Electricity, Gas, Water Supply &
Electricity, Gas, Water Supply & Other Utility Other Utility Services, Construction, Trade, repair,
Services, Construction, Trade, Hotels & Transport, Hotels and Restaurants, Transport, Storage and
Communication and Broadcasting Services, Communication & Services related to
Financial, Real Estate and Professional Services, Broadcasting and Other services. However,
Public Administration, Defence, and Other Agriculture, Forestry and Fishing, Financial
Services. Services, Real Estate & Professional Services and
The growth rates of Primary sector (comprising Public Administration and Defence have only
Agriculture, Forestry, Fishing and Mining & witnessed a modest growth during this period.

For 2022-23, Abroad – Net Taxes

Gross Value Added of all industries = Rs. National Income of 2022-23:
2,47,07,001 crore National Income = 2,72,03,767 crore – 28,73,198
Final Gross Domestic Product = Rs. 2,72,03,767 crore + (-5,44,783 crore) – 24,96,766 crore
crore National Income = Rs. 2,12,89,020 crore
Depreciation = 28,73,198 crore Similarly, National Income of 2021-22 = Rs.
Net Factor Income from Abroad = -5,44,783 crore 1,82,94,672 crore
Net Taxes = 24,96,766 crore
b. Expenditure Approach
National Income or NNPFC = Gross Domestic This method measures national income at the
Product – Depreciation + Net Factor Income from disposition stage. The four components of GDP

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are, because of positive net capital flow from Rest of

i) Private Final Consumption the World. The highest contributor of Gross Fixed
Expenditure(C) - It includes goods and services, Capital Formation at current prices is Non-
which are purchased by households for final Financial Corporations followed by Household
consumption. sector, shares of which stood at 44.1% and 40.5%
ii) Gross Fixed Capital Formation/ respectively in 2021-22.
Investment Expenditure(I) - It consists of goods Private Final Consumption Expenditure (C) at
and services bought for use of further production. current prices is estimated at Rs. 143.44 lakh crore
It includes gross fixed business investment, for the year 2021-22 as against Rs. 121.50 lakh
inventory investment and gross residential crore in 2020-21. The Private Final Consumption
investment. Expenditure to Gross Domestic Product ratio at
iii) Government Final Expenditure (G) - They current prices during 2020-21 and 2021-22 are
include the goods and services bought by the 61.3% and 61.1% respectively.
different governments like defence equipment. Government Final Consumption Expenditure (G)
iv) Net Exports (X-M): They are the values at current prices is estimated at Rs. 26.25 lakh
of goods and services exported to other countries crore for 2021-22 as compared to Rs. 23.03 lakh
minus the value of goods and services imported crore during 2020-21.
into the country.
III. Measurement of GDP: Nominal v/s
Gross Domestic Product = C + I + G + (X-M) Real
For 2022-23, For evaluating economic activity,
Private Final Consumption Expenditure = stability, and growth of goods and services in an
1,74,71,083 crore economy, GDP is considered one of the most
Investment Expenditure = 28,53,537+1,80,751 = important metrics for measurement. It is calculated
30,34,288 crore from two angles: Nominal and Real.
Where, I = Gross Fixed Capital Formation + Nominal GDP is a macroeconomics measurement
Change in Stock of the value of goods and services produced using
Government Final Expenditure = 79,45,898 crore current prices prevailing in the economy. As such,
Net Exports = 61,07,093 – 73,24,249 = -12,17,156 Nominal GDP is also referred to as “Current Dollar
crore GDP”.
As Nominal GDP measures economic activity of
GDP = 1,74,71,083 crore + (28,53,537+1,80,751) an economy without factoring in price changes that
crore + 79,45,898 crore + (61,07,093 – 73,24,249) occur due to inflation or deflation, it may show
crore inflated growth because goods and services that are
GDP = Rs. 2,72,34,113 crore used to determine Nominal GDP are valued at
current year prices.
National Income or NNPFC = Gross Domestic To eliminate inflated calculation, Real GDP is
Product – Depreciation + Net Factor Income from determined.
Abroad – Net Taxes
National Income of 2022-23: Real GDP is a macroeconomic statistic that
National Income = 2,60,53,362 crore - 28,73,198 measures the value of goods and services produced
crore + (-5,44,783 crore) – 24,96,766 crore by an economy during a certain period, taking
National Income = Rs. 2,13,19,366 crore price changes into account, whether they are due to
Similarly, National Income of 2021-22 = Rs. inflation or deflation.
1,81,23,811 crore It is expressed in base-year prices and is often
referred to as inflation-corrected, constant-price or
Gross Capital Formation or Investment constant-dollar GDP. Real GDP makes comparing
Expenditure (I) at current prices is estimated at Rs. GDP more meaningful as it shows comparisons for
73.62 lakh crore for the year 2021-22 as compared both the quantity and value of goods and services.
to Rs. 55.27 lakh crore during 2020-21. The rate of
Gross Capital Formation to Gross Domestic To calculate Real GDP, nominal GDP is divided
Product is 31.4% during 2021-22 compared to by a GDP Deflator.
27.9% in the 2020-21. The rates of capital Both nominal as well as real GDP are used
formation in the years 2011-12 to 2019-20 and globally as metrics for evaluating economic growth
2021-22 have been higher than the rate of savings and purchasing power over time. This is done by
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using GDP price Deflator, which helps in As of Year 2022, India’s Nominal GDP (current)
measuring the change in prices of all the goods and is $3,385,090,000,000 (USD), whereas, the Real
services in an economy. GDP (constant) of India reached
Real GDP = Nominal GDP $2,432,020,000,000 in 2022.
GDP Deflator GDP Growth Rate in 2022 was 7.00%,
representing a change of 193,390,000,000 US$
The base-year for calculating India’s GDP is 2011- over 2021, when Real GDP
2012 which was adopted in the year 2015, before was $2,761,590,000,000.
that the base-year used to be 2004-2005.

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a. Is GDP a true measure of welfare? However, a number of counties have started to

realise that focusing exclusively on GDP and
Starting with the origin of GDP, its modern economic growth would not ensure societal
conception is a product of war. It was originally progress. For instance, India is developing an Ease
thought by Simon Kuznets during the Great of living index that will measure quality of life,
Depression and later modified by John Maynard economic ability and sustainability that will help
Keynes during the Second World War. us understand the holistic impact of policies rather
than just economical.
According to Keynes, the estimate of national
income should be the sum of private consumption, IV. Per Capita Income and its Impact on
investment and government spending. His method the Economy
of calculating GDP found acceptance globally and Per Capita Income refers to the average income
is practiced till today. earned per person in the nation. It is used to
calculate the average income for an individual in
But a measure created for assessing war time the nation in a year. Per Capita Income is
production has glaring flaws in peacetime. For one, calculated by dividing the national income of a
GDP does not take the qualitative outcomes and country by its population.
externalities produced into account. For example,
environmental degradation is a prominent Impact Of Per Capita Income On The Economy
externality that the GDP does not account for. It 1. Direct relationship with economic growth:
also fails to capture income distribution in the The population of a country plays a major role in
society, which has become an issue of alarm due to the per capita income and therefore in the
the rising inequality levels between the rich and the economic growth of the country. In a country like
poor. India where the population is rapidly increasing,
the per capita income tends to decline as the
“GDP measures everything” Senator Robert population increases but the income remains the
Kennedy said, “except that which makes life same. If a country's per capita income is stable it
worthwhile.” It fails to measure health, education, will have no problem adjusting to the rise in the
equality of opportunity, the state of environment or population and hence economic growth will not be
other indicators of the quality of life. Crucial affected. Just as the rise in the per capita income,
aspects of an economy like sustainability are also the economic growth will also rise [due to its direct
not measured. relationship]. India’s economy is the 5 th largest in
the world and is targeted to be the 3rd largest by
GDP only measures the size of a nation’s 2030.
economy; it does not reflect a nation’s welfare. Yet 2. Development in Standard of Living: If
policy makers, politicians and the public treat GDP there is a high per capita income it means that the
as an all-encompassing unit to signify a nation’s overall population has a higher disposable income
development. As a result, policies that result in which increases their capacity to spend more on
increase in GDP, irrespective of their externalities goods and services which in turn advances the
are thought to be as beneficial for the society. standard of living of people.
Per Capital Income of India (2022-23):

The per capita income of India has seen a previous year’s GDP which shows the positive rise
consistent rise over the years. The image depicts in India’s economic growth. However, this number
three different years, but for this project, we will has fallen as compared to last year's calculation as
stick to the current year's prices. earlier the jump was approximately 17.2%.
The per capita GDP has seen a 14.7% rise from the The same story is replicated by per capita GNI
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(Gross National Income), per capita NNI (Net Economy?

National Income), and per capita PFCE (Private Financial Flexibility:
Final Consumption Expenditure) where they have Disposable income provides freedom to spend their
seen a consistent rise yet it cannot match the money and to decide whether to invest or consume
previous year's percentages. The rise in the goods and services. It plays a critical role in taking
population has also played a major role in the rise care of people’s needs and plans for the future.
of this per capita income. Macroeconomic Growth:
The percentage of income spent by the consumer
a. Disposable Income and its Importance on consumption is a major contributor to economic
growth, which is largely affected by the disposable
Disposable income refers to the final sum of income of the people. With the rise in disposable
money left from the income after the deduction of income consumers are prone to spend on products
all taxes. Disposable income is also referred to as, and services which in turn boosts economic
net income which is spent on the purchase of activity and helps in employment creation.
necessities and luxuries. Economists keep a close Investments & Savings:
check on the disposable personal income of people With disposable income people can invest in their
as it is a prime indicator of a strong economy. long-term goals such as kids' college fees or saving
Disposable Income = Total Income – Taxes – to buy a house. Investing provides companies with
Compulsory Deductions greater capital and hence strengthens the economy
as a whole.
Why is Disposable Income Important for The

Gross National Disposable Income of India (2022-23)

At current estimated prices the Gross National Disposable Income of India is roughly calculated at ₹273.99 lakh
crore for the year 2022-23, however for the year 2021-22 the disposable income stood at ₹239.25 lakh crore,
depicting a growth of 14.5% for the year 2022-23 in comparison to the growth of 18.8% in the year 2021-22.

b. Purchasing Power Parity different when you take the USA in comparison
Purchasing Power Parity is calculated and thus, we use Purchasing Power Parity where you
used to compare the standard of living of a country take a basket of goods and services and how much
as well as its economic productivity. It is used to income you require to purchase the same amount
measure the purchasing power of different of goods in any other country or determine their
currencies across countries by equalizing the prices purchasing power. This is very important for
of goods and services. For example: the goods and economists as it helps to compare the economies of
services you can purchase with ₹100 in India are the different countries.

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This is a brief example of what we discussed above Parity in India between rural and urban areas. The
it explains how much money you need to maintain rural cost of living is one-third of what the cost of
a lifestyle of 100,000 dollars in the USA in living is in the urban areas. Thus, the rural PPP is
comparison to other countries. much higher than the urban India. Furthermore, the
Purchasing Power Parity in India: rise in costs of the rural economy is far slower than
India ranks 12th by the gross domestic product the urban economy. Apart from the costs the rural
calculation, whereas when it comes to the PPP- economy is more adaptable.
adjusted GDP India ranks 3rd right behind the US In India, there is a high difference between the
and China. PPPs of different states as well.
When we come to compare the Purchasing Power

The above image depicts the ranging PPPs of different cities in India. Bangalore has the highest Purchasing
Power in comparison to Mumbai and other metropolitan cities.

V. Case Study: Analyzing India’s demand indicators: GDP was growing at about 7.5
Economic Resilience- Unraveling the Puzzle of percent, while investment and exports were
growth amidst shocks growing faster, at 13 percent and at the rate of 15
During 2002–2011, India behaved like a percent. percent respectively, corresponding to a
typical fast-growing country, with measured GDP mean value of 12 percent for both variables among
growth showing a strong correlation with other comparable fast growers.

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A number of shocks struck the Indian economy between 2011 and 2016. Throughout the whole five-year period
under review, growth was impacted by three of these shocks. These were:

1.Export Collapse: Strong worldwide demand for surprise that investment growth fell by 10
emerging markets' goods propelled them during the percentage points, which could reduce growth by
2000s, allowing their average export growth to be an additional 2½ to 3 percentage points.
very rapid. But since 2011, there has been a
slowdown in global demand, which has led to the 3.Oil Price and terms of trade: Offsetting these
collapse of emerging market export growth. India's negative shocks were positive ones in the form of
export growth slowed to just 3% annually from an falling oil prices and consequent improvement in
average of 15% annually prior to 2011. With a the terms of trade for India as a net oil importer.
rough estimate of roughly 2½ percentage points, The annual average change in real US$ oil prices
this shock has the potential to significantly slow was about 16.5 percent between 2002-2011 and
development because India's export-to-GDP ratio minus 16 percent between 2012-2016. Again, a
was roughly 22% between 2012 and 2016. rough calculation suggests that this should have led
2. Twin Balance Sheet Problem: During the boom to growth of about 1 to 1 ½ percentage points.
of the mid-2000s many companies invested heavily
in projects that did not work out, leading to 4. Drought (2014-2015). The agricultural sector
significant stress in the corporate sector and was hit by drought for two consecutive years.
double-digit levels of non-performing assets in Growth in foodgrain production was -4.9 percent
banks. As a result, many companies are not and 0.5 percent in these years, well below the long-
financially strong enough to invest, while banks term average of about 3 percent. This reduced
are reluctant to lend even to healthy companies. growth, which is about 0.4 percent.
Real credit growth in India dropped from 14% to
6% before to 2011.More significantly from the 5. Demonetization (2016). Finally, there was a
standpoint of investments, real credit growth to major macroeconomic shock in the last year of our
industry contracted from a depressing fifteen sample period, when the currency supply fell by 86
percent to a pitiful one percent. Additionally, the percent in November 2016, affecting the
figures may potentially exaggerate the amount of production of the large informal sector, which
credit that was utilized to finance firms' relies heavily on cash.
investments if part of the credit growth—after TBS The following graph illustrates the major effect of
took effect—represented evergreening, or bank these shocks on key macro indicators of growth in:
lending to cover interest payments of stressed
enterprises. Therefore, it should come as no

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● Real credit to industry collapsed, falling ● Overall real lending declined from 13
from 16 percent to -1 percent, reflected in official percent to 3 percent;
figures for real investment growth, which fell from
● Real imports fell from 17 percent to
13 percent to 3 percent;
minus 1 percent.
● Actual exports fell from 15 percent to 3
percent;

But the new GDP series shows that despite this big does not necessarily increase development.
shock, economic growth has dropped from 7.7
percent to 6.9 percent.17 This raises the question: 2.Productivity Surge: Consider the next
Could it be that these five big negative effects productivity improvement opportunity. If such
really have less impact? SME development? growth takes place in the post-2011 period,
Possible Explanation: Of course, there may be productivity should have accelerated in the last two
other things to compensate for this big earthquake. years of the UPA-2 regime, amid acute macro
Specifically, three possibilities should be stress and declining policy credibility. This makes
considered: the beneficial reform efforts of the trust difficult; it is more likely that productivity
NDA government; increase productivity; and will actually decrease during these difficult times.
consumer growth. Furthermore, if productivity has increased, we
should see benefits in the form of higher profits for
1.NDA-2 Reforms: Take a first look at the NDA the company. But figure below, using the Provess
reforms. Three are very important: the historic database (which collects data from firms' balance
introduction of the Goods and Services Tax (GST), sheets), shows the opposite: the annual growth of
the upcoming Insolvency and Bankruptcy Code real income (before and after tax) of the Indian
(IBC) and the public offering of essential private corporate sector (domestic, foreign and
goods and services (PPEGS) - housing, gas, government combined)) dropped from 22-28
energy, toilets, bank accounts, insurance percent to a negative growth zone, a sharp drop if
emergency medicine. But GST and IBC, which productivity increased, actually collapsing. Profit
will provide growth benefits in the medium term, accumulation contradicts the explanation of
were implemented after the period covered by this productivity growth.
study. PPEGS, which in turn increases welfare,

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 International Journal of Humanities Social Science and Management (IJHSSM)
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3. Consumption Surge puzzle: Post-2011, India has our analysis has illuminated its inherent
experienced several major shocks that have had a limitations, particularly its inability to capture
significant impact on demand indicators but little qualitative aspects of economic welfare.
impact on measured growth. That is, India has
continued economic growth in an environment of Examining India’s growth trajectory over
lower investment, income, exports, debt financing the years has revealed both triumphs and
and possible consumption. The three conventional challenges. The impact of export collapses, the
explanations usually offered to explain this Twin Balance Sheet problem, fluctuating oil
phenomenon are inconsistent with the available prices, and terms of trade fluctuations has
evidence. This leaves us with a profound highlighted the vulnerability of the Indian
conundrum. economy to external shocks. Additionally, events
such as demonetization have underscored the
VI. Conclusion complexities of policy interventions and their
Our comprehensive exploration of repercussions on economic dynamics.
national income has provided us with a deep
understanding of the concept as well as its Nevertheless, amidst these challenges,
implications in context with India. By exploring India has exhibited resilience and adaptability. The
various theoretical frameworks and methodologies economy’s ability to rebound from setbacks such
such as output and expenditure methods, we have as demonetization underscores its inherent strength
gained insights into the intricate process of and potential for growth. Through prudent policy
calculating National Income. Moreover, our measures and structural reforms, India has
discussion on purchasing power parity, disposable demonstrated its capacity to navigate turbulent
income, and per capita income has shed light on waters and emerge stronger.
the standard of living and economic well-being of
the Indian populace. Looking ahead, as India continues its
journey towards economic prosperity, it must
Furthermore, a deep dive into the remain vigilant to address systemic issues and
comparison between Real GDP and Nominal GDP foster inclusive growth. By leveraging its
has underscored the importance of accounting for demographic dividend, technological prowess, and
inflationary pressures and price level fluctuations entrepreneurial spirit, India can chart a path
when assessing economic performance. Despite the towards sustainable and equitable development,
utility of GDP as a measure of economic activity,
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 International Journal of Humanities Social Science and Management (IJHSSM)
Volume 4, Issue 2, Mar.-Apr., 2024, pp: 1548-1560 www.ijhssm.org

ultimately realizing its aspirations of becoming a

global economic powerhouse.

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