Importance of National Income Analysis
Importance of National Income Analysis
1. For the Economy- The national income data are of great importance for the economy of a country. These days the national income data are regarded as accounts of the economy, which are known as social accounts. These refer to net national income and net national expenditure, which ultimately equal each other. Social accounts tell us how the aggregates of a nation’s income, output and product result from the income of different individuals, products of industries and transactions of international trade. Their main constituents are inter-related and each particular account can be used to verify the correctness of any other account.
2. National Policies- The national income data form the basis of national policies such as
employment policy, because these figures enable us to know the direction in which the industrial output, investment and savings, etc. change, and proper measures can be adopted to bring the economy to the right path.
3. Economic Planning-In the present age of planning, the national data are of great importance. For economic planning, it is essential that the data pertaining to a country’s gross income, output, saving and consumption from different sources should be available. Without these, planning is not possible.
4. Research- The national income data are also made use of by the research scholars of economics. They make use of the various data of the country’s inputs, outputs, income, saving, consumption, investment, employment, etc., which are obtained from social accounts.
5. Per Capita Income- The national income data are significant for a country’s per capita income which reflects the economic welfare of the country. The higher the per capita income, the higher the economic welfare and vice versa.
6. Distribution of Income- The national income statistics enable us to know about the distribution of income in the country. From the data pertaining to wages, rent, interest and profits, we learn of the disparities in the incomes of different sections of the society. Similarly, the regional distribution of income is revealed. It is only on the basis of these that the government can adopt measures to remove the inequalities in income distribution and to restore regional equilibrium. With a view to removing these personal and regional disequilibria, the decisions to levy more taxes and increase public expenditure also rest on national income statistics.
