National Income, GDP and Union Budget - Explained with Examples
National Income and GDP Concepts
1. What is National Income?
National Income is the total value of all final goods and services produced by a country during a given period (usually one year), including income earned from abroad.
2. Major Aggregates of National Income
- GDP (Gross Domestic Product): Value of all final goods/services produced within the domestic territory.
- GNP (Gross National Product): GDP + Net Factor Income from Abroad (NFIA).
- NNP (Net National Product): GNP - Depreciation.
- National Income at Factor Cost: NNP at Market Price - Indirect Taxes + Subsidies.
Example:
GDP = ₹2,000 crore
NFIA = ₹100 crore
Depreciation = ₹150 crore
Indirect Taxes = ₹180 crore, Subsidies = ₹30 crore
GNP = 2000 + 100 = ₹2100 crore
NNP = 2100 - 150 = ₹1950 crore
National Income at Factor Cost = 1950 - 180 + 30 = ₹1800 crore
3. Methods of Computing National Income
- Production Method: NI = Gross Value Added (GVA) of all sectors - Depreciation
- Income Method: NI = Compensation to Employees + Rent + Interest + Profit + Mixed Income
- Expenditure Method: NI = C + I + G + (X - M)
Example (Expenditure Method):
C = ₹800 crore, I = ₹400 crore, G = ₹600 crore, X = ₹200 crore, M = ₹300 crore
NI = 800 + 400 + 600 + (200 - 300) = ₹1700 crore
4. Utility of National Income
- Measure of Economic Performance
- Basis for Economic Planning
- Helps in International Comparisons
- Tool for Understanding Standard of Living
Union Budget
1. What is the Union Budget?
The Union Budget is the annual financial statement of the Government of India, showing its estimated receipts and expenditures for the financial year (April 1 to March 31).
2. Types of Receipts
- Revenue Receipts: Regular income (tax and non-tax) that doesn’t create liability or reduce assets.
- Capital Receipts: Borrowings, recovery of loans, disinvestment – creates liability or reduces assets.
Example:
Revenue Receipts = ₹20 lakh crore (Tax = 16, Non-tax = 4)
Capital Receipts = ₹10 lakh crore (Borrowing = 8, Disinvestment = 2)
3. Types of Expenditure
- Revenue Expenditure: Day-to-day expenses like salaries, interest payments.
- Capital Expenditure: Creation of assets like infrastructure, loans to states.
Example:
Revenue Expenditure = ₹24 lakh crore
Capital Expenditure = ₹6 lakh crore
4. Plan vs Non-Plan Expenditure
Before 2017, expenditures were classified as Plan and Non-Plan. Now, the classification has been discontinued and merged under Capital and Revenue.
5. Budget Deficit Concepts
- Revenue Deficit: Revenue Expenditure - Revenue Receipts
- Fiscal Deficit: Total Expenditure - Total Receipts (excluding borrowings)
- Primary Deficit: Fiscal Deficit - Interest Payments
Example:
Revenue Expenditure = ₹24 lakh crore, Revenue Receipts = ₹20 lakh crore
→ Revenue Deficit = 24 - 20 = ₹4 lakh crore
Total Expenditure = ₹30 lakh crore, Total Receipts (excluding borrowings) = ₹22 lakh crore
→ Fiscal Deficit = 30 - 22 = ₹8 lakh crore
Interest Payments = ₹3 lakh crore
→ Primary Deficit = 8 - 3 = ₹5 lakh crore
6. Importance of Budget
- Maintains fiscal discipline and macroeconomic stability
- Supports inclusive development through welfare spending
- Promotes growth through capital expenditure
- Signals policy direction of the government
Conclusion
National income and budgetary concepts are key to understanding the health of an economy. While National Income captures value creation, the Union Budget reflects how that value is allocated and redistributed for public welfare and economic management.
Labels: National Income, GDP, Union Budget, Fiscal Deficit, Revenue Expenditure, Economic Concepts, Banking Exams| Chapter Number | PAPER I – INDIAN ECONOMY & INDIAN FINANCIAL SYSTEM MODULE B: ECONOMIC CONCEPTS RELATED TO BANKING |
|---|---|
| 1. |
MODULE B: ECONOMIC CONCEPTS RELATED TO BANKING Fundamentals of Economics, Microeconomics, Macroeconomics, Types of Economies, and Supply & Demand |
| 2. | Money Supply and Inflation |
| 3. | Theories of Interest - Explained with Examples |
| 4. | Business Cycles and Economic Policies - Explained with Examples |
| 5. | National Income, GDP and Union Budget - Explained with Examples |
| QandAs/MCQs 8 | MCQs: Economics Fundamentals, Micro and Macro Concepts |
| QandAs/MCQs 9 | MCQs on Money, Money Supply, and Inflation |
| QandAs/MCQs 10 | MCQs on Theories of Interest - IS-LM, Classical & Keynesian Theory |
| QandAs/MCQs 11 | MCQs: Business Cycle, Policies, National Income |
| QandAs/MCQs 12 | MCQs: Monetary & Fiscal Policy | National Income | Union Budget |
| MODULE C: INDIAN FINANCIAL ARCHITECTURE | |
| MODULE D: FINANCIAL PRODUCTS AND SERVICES | |
| MODULE A: INDIAN ECONOMIC ARCHITECTURE | |
Comments