Measurement of National Income in India: 8 Major Difficulties

The following points highlight the eight major difficulties in the measurement of National Income in India.

The difficulties are: 1. There is Lack of Reliable Statistics 2. No Proper Accounts are Available 3. There is Absence of Correct Assessment of Output 4. System of Unorganised Production 5. Lack of Proper Classification of Data Collected 6. Un-Organised Markets 7. Lack of Uniform Basis of Calculation of Commodities 8. Lack of Common Denominator.

Difficulty # 1. There is Lack of Reliable Statistics:

The greatest difficulty in the calculation is the non-availability, inadequacy and unreliability of statistical figure.

Up-to-date and correct statistical information regarding agriculture and allied occupations is not available.

There is no information available regarding expenditure and savings of the people. Whatever statistics are available of one region cannot be used for another region.

Difficulty # 2. No Proper Accounts are Available:

People in India mostly do not maintain accounts of income and expenditure. Illiteracy of the people is the main reasons. Further Indians are by tradition suspicious in nature and do not co-operate in the collection of data.

Difficulty # 3. There is Absence of Correct Assessment of Output:

The assessment of output, produced by self-employed agriculturists, small producers and owners of household enterprises are all an element of guess work; therefore, correct calculation of national income is not possible.

Difficulty # 4. System of Unorganised Production:

In India both agricultural and industrial production is unorganised and scattered. Therefore calculation is not an easy affairs. Further, Indian agricultural section is dominated by subsistence farming and is a semi-segment sector and has therefore small significance in estimating the national income of a developing economy.

Difficulty # 5. Lack of Proper Classification of Data Collected:

The usual industrial and agricultural classification of collected data is not possible. Therefore, we cannot expect to have correct national income information.

Difficulty # 6. Un-Organised Markets:

The large un-organised markets and non-monetized factor of the Indian economy present the greatest difficulty in the national income calculations in India.

Difficulty # 7. Lack of Uniform Basis of Calculation of Commodities:

Another important difficulty is the absence of an uniform basis of evaluation of commodities and services in terms of money. Further, it becomes more difficult to calculate those commodities which do not come in the market or it is either consumed by the producers themselves or is battered for other commodities and services.

Difficulty # 8. Lack of Common Denominator:

In the end, there is the universal academic difficulty of reducing the numerous economic activities of large number of people to a common measurable denominator.

For example:

The services of a poor worker cannot be compared to those of a minister.