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Wednesday, 18 May 2011

Difficulties of Measurement of National income

The main difficulties which are involved in the measurement of national income are following :

1. Lack of statistical data :-
In the less developing countries, the accurate figures about the various sectors of economy are not available due to this we are unable to estimate the real national income of the country.

2. Lack of staff :-
There is a shortage of trained staff which may collect the statistics about the national product.

3. Public co-operation :-
Public is also not ready to provide the correct figures about the income due to the fear of income tax.

4. No account :-
Some people do not keep any proper account about their business income, so their income is not included in the national income.

5. Difficulty in assessment :-
Some goods and services value can not be assessed easily. For example the value of different Cows and Sheep's is very difficult.

6. Problem of double counting :-
While computing the national income there is always a danger of double counting. If the care is not taken the national income is over estimated.

7. Unpaid services :-
In national income only those services are included for which the payment is made. The unpaid services are excluded.

8. Assessment of depreciation :-
The assessment of depreciation allowance, repair and replacement charges is a very difficult job.

9. Controversial issue of house rent :-
A landlord receives Rs. 1000 monthly a rent of his house. This rent will be included in the national income. If this house is purchased by the tenant. Now Rs.1000 will not be paid by the tenant. So now Rs. 1000 income of the tenant has increased. Now the controversial issue is that it should be included in the national income or not.

10. Transfer earnings :-
The transfer earnings like pensions are excluded from the national income and it feels problem.

11. Foreign payments :-
We include only net foreign balance, if we include all the sources from which foreign payment is received, it will be more difficult.

12. Direct exchange :-
In the less developing areas people exchange the commodities with the commodities and do not use the money. So the value of these goods can not be estimated.

13. Income of foreign companies :-
The income of foreign investment is not included in the national income. Because these companies send some portion of their profit to their own countries.

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