How To Calculate National Income By Income Method With Formulas ,Diagrams and Examples| Economics Class 12th

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The national income by income method is calculated under 3 heads or steps :

Step 1:-

Identification and classification of producing enterprises who employ factors of production. In India, the producing sector is identified and classified into three –

a) Primary Sector

b) Secondary Sector

c) Tertiary Sector

Step 2:-

Classification of domestic factor income or domestic income( NDPfc)

a) Compensation of employees– It is the sum total of wages in cash, in-kind and employers contribution towards social security schemes.

b) Operating surplus – It is the sum total of income from property (Rent, interest, royalty ) and income from entrepreneurship (Profit, corporation taxes, undistributed profits and dividends)

c) Mixed income of self-employed- It is the income of unincorporated enterprises like farmers, shopkeepers etc which are doing their own business. The income like rent, wages, profits etc cannot be segregated. Therefore, it is called mixed income of self-employed.

classification of dometic factor income, national income, NDPfc, operating surplus, mixed income of self employed, compensation of employees

Step 3:-

Estimation of National Income

To find out national income,

NY– Domestic Income + NFIA

Formulas of Income Method

1) GDPmp – Compensation of employees + operating surplus + mixed income of self-employed + Depreciation+ Net indirect taxes

2) GNPmp – GDPmp + NFIA

3) NDPmp – GNPmp – Depreciation – NFIA

4) NNPmp– NDPmp +NFIA

5) NNPfc – NNPmp – Net indirect taxes

Direct Formula

NY( NNPfc) = Compensation of employees + Operating Surplus + Mixed Income +NFIA


Que: Calculate national income by income method.

ParticularsRs (in crores)
Mixed Income Of Self-employed35
Operating Surplus200
Compensation Of Employees250


NY (NNPfc) = Compensation of employees+ Operating Surplus + Mixed Income of Self-employed + NFIA

=250+200+35 + (-)5





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