Difficulties in Measurement of National Income | Economics Class 11

Notes | Commerce
Difficulties in Measurement of National Income
For: Management Class 11

There are many difficulties in measuring national income of a country accurately because it is a multi-dimensional concept. So, the calculation of national income itself is a complex and challenging activities. While measuring the national income, there arise some conceptual and statistical difficulties which are as follows:

1. Problems of double counting

While calculating national income, only final goods and services should be included, but some goods may be final for one sector and intermediate for another sector. For example, sugarcane is final goods for agricultural sector but it may be intermediate goods in industrial sector for producing sugar. Thus, there is very high possibility of double counting.

2. Existence of non-monetized sector

In developing country, there is still barter system in backward areas. Thus, all agricultural outputs do not reach to the market. Either it is consumed at home or exchange for other goods in the village. Hence, it is difficult to calculate the national income accurately.

3. Illegal income

Different people can earn income through illegal activities, such as, black marketing, dacoits, gambling, smuggling etc. But these incomes are not included in national incomes which make national income less than the actual amount.

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