Importance of National Income Analysis
National income is of great importance for the economy of a
country. Nowadays the national income is regarded as accounts of the economy,
which are known as social accounts. It enables us
1. To know the relative importance of the various sectors of the
economy and their contribution towards national income; from the calculation of
national income, we could find how income is produced, how it is distributed,
how much is spent, saved or taxed.
2. To formulate the national policies such as monetary policy,
fiscal policy and other policies; the proper measures can be adopted to bring
the economy to the right path with the help of collecting national income data.
3. To formulate planning and evaluate plan progress; it is
essential that the data pertaining to a country’s gross income, output, saving
and consumption from different sources should be available for economic
planning.
4. To build economic models both in short - run and long - run.
5. To make international comparison, inter - regional comparison
and inter - temporal comparison of growth of the economy during different
periods.
6. To know a country’s per capita income which reflects the
economic welfare of the country (Provided income is equally distributed)
7. To know the distribution of income for various factors of
production in the country.
8. To arrive at many macro economic variables namely, Tax – GDP
ratio, Current Account Deficit - GDP ratio, Fiscal Deficit - GDP ratio, Debt -
GDP ratio etc.
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