Problems of Measurement in a veloping Economy
Problems of Measurement in a
In a developing economy, complete and reliable information relating to the various methods of estimating, national income are not available due to the following problems:
1. Non-monetised Sector- There is a large non-
monetised sector in a developing economy. This is the subsistence sector in rural areas in which a large portion of production is partly exchanged for the other goods and is partly kept for personal consumption. Such production and consumption cannot be calculated in national income.
2. Lack of Occupational Specialisation- There is the lack of occupational specialisation in such a country which makes the calculation or national income by product method difficult. Besides the crop, farmers in a developing country are engaged in supplementary occupations like dairying, poultry, cloth making, etc. But income from such productive activities is not included in the national income estimates.
3. Non-market Transactions- People living in rural
areas in a developing country are able to avoid expenses by building their own huts, tools, implements, garments and other essential commodities. Similarly, people in urban areas having kitchen gardens produce vegetables which they consume themselves. All such productive activities do not enter the market, transactions and hence are not included in the national income estimates.
4. Illiteracy- The majority of people in such a country are illiterate and they do not keep any accounts about the production and sales of their products. Under the circumstances, the estimates of production and earned incomes are simply guesses.
5. Non-availability of Data-Adequate and correct production and cost data are not available in a developing country. Such data relate to crops, forestry, fisheries, animal husbandry, and the activities of petty shopkeepers, small enterprises, construction workers, etc. For estimating national income by the income method, data on unearned incomes and on persons employed in the service sector are not available. Moreover, data on consumption and investment expenditures of the rural and urban population are not available for the estimation of national income by the expenditure method. Moreover, there is no machinery for the collection of data in such countries.