State the meaning of National Income and explain the features of National Income.

Answer: National income is the money value of all final goods and services produced by a country during a year, plus net income from abroad.

Meaning: National income is the total money value of all final goods and services produced in an economy during a year, including net factor income from abroad. Alfred Marshall defined it as: “The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial, including services of all kinds. This is the true net annual income or revenue of the country or the national dividend.”

Features of national income:

1. Macro economic concept: It is an aggregate concept related to the economy as a whole, not to an individual.
2. Flow concept: It is a flow of goods and services produced over a period of time, not a stock.
3. Measured in money terms: Goods and services are measured in terms of money, the common measure of value.
4. Final goods only: Only final goods and services are included; intermediate goods are excluded to avoid double counting.
5. Net income from abroad: Net factor income from abroad (exports − imports, and receipts − payments from abroad) is included.
6. Accounting year: It is calculated for a financial year, from 1 April to 31 March in India.
7. Market value of current production: Only goods and services produced in the current year are counted; sale of old goods and transfer payments are excluded.
8. Excludes non-market activities: Unpaid services, like services of a housewife, are not included.