DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : R. Mohan
Designation : Head of ccp
Branch : commercial &
computer practice
Institution : GMR. Polytechnic
Gajwel
Year/Semester : III year/ VI th semester
Subject : Business Economics II
Subject Code : CCP-602.
Topic : National Income
Sub-topic : Importance of NI
Duration : 100 minutes.
Teaching Aids : PPts Animation
CCP.602.35 to 36 1
Objectives:

On completion of the period you will be able

to know
 Importance of calculating the National
Income.

CCP.602.35 to 36 2
Recap:

 National Income .

 Various Components of National income GNP – NNP -

PCI – PI.

 Calculation of the above.

CCP.602.35 to 36 3
 Importance of National Income

An individual as well as government have to maintain

the accounts of their incomes and expenditure in
one form or another

CCP.602.35 to 36 4
 Importance of National Income

The growing importance of national income is

due to the following reasons:
1. Economic Policy
2. Economic Planning
3. Economic Structure
4. Inflationary & deflationary gaps

CCP.602.35 to 36 5
Importance Cont..

5. budgetary policies .

6. National Expenditure.

7. Distribution of grants – in aid.

8. Standard of living comparison.

9. International sphere.

10. Defence and development .

11. Public sector.

CCP.602.35 to 36 6
Importance Contd.,

3. Economic policy:

With the help of NI

 We know the aggregate yield of the
economy and
 Can lay down future economy policy for
development

CCP.602.35 to 36 7
Importance Cont..

3. Economic Planning :

NI statistics are the tools for

 Long term and
 Short term economic planning.

CCP.602.35 to 36 8
Importance Cont..

3) Economy’s structure :
NI statistics enables us to know

 Relative importance of various sectors and

 Their contribution towards national income.

CCP.602.35 to 36 9
Importance Cont..

3) Inflationary and Deflationary gaps:

We need regular estimates of NI for

 Accurate and timely anti – inflationary and
 Deflationary gaps

CCP.602.35 to 36 10
Importance Cont..

3) Budgetary policies :
Government prepares
 Budgets
 Formulates anti cyclical policies
 Taxation &
 Borrowing policies

CCP.602.35 to 36 11
Importance Cont..

3) National Expenditure :
NI studies show how National expenditure
is divided between
 consumption expenditure and Investment
expenditure

CCP.602.35 to 36 12
Importance Cont..

3) Distribution of grants - in - aid :

NI help a fair distribution of grants–in- aid by

the central government to the state government

CCP.602.35 to 36 13
Importance Cont..

3. Standard of living Comparison:

 To compare the standard of living of

people in different countries and

 People living in the same country at

different times.

CCP.602.35 to 36 14
Importance Cont..

3. International sphere:
Help us to fix
 The burden of International payment and
 Enable us to determine subscriptions to the
international bodies like UNO

CCP.602.35 to 36 15
Importance Cont..

3. Defence and Development :

NI helps us to divide the national product

between defence and development

purposes.

CCP.602.35 to 36 16
Importance Cont..

3. Public sector :

NI enables to know relative roles of public

and private sector in the economy.

CCP.602.35 to 36 17
Summary:

 It is the duty of the government to know the

changes in national income order to have proper

assessment of the economic progress of the

economy .

CCP.602.35 to 36 18
Quiz:

3. The most important tools for long-term and short – term

economic planning is__________

4. ________ helps us to have an idea of the inflationary and

deflationary gaps.

5. __________ enable us to determine the subscription and

quotas of different countries like UNO, IMF, IBRD etc.

Ans 1) National Income 2) National Income 3) National income

CCP.602.35 to 36 19
 Frequently occurring Questions

 Explain the importance of calculating the National

Income.

CCP.602.35 to 36 20
Assignment:

 Briefly give reasons for estimating the National

Income.

CCP.602.35 to 36 21