According to Kuznets, the
measurement of national income
is a complicated problem and is best with the following difficulties:
(i) Non-availability of statistical material:
Some persons like electricians,
plumbers, etc., do some job in their spare time and receive income. The state
finds it very difficult to know the exact amount received from such services.
This income which, should have been added to the national income is not recorded
due to {be lack of full information of statistics material.
(ii) The danger of double counting: While computing the national income,
there is always the danger of double or multiple counting. If care is not taken
in estimating the income, the cost of the commodity is likely to be counted
twice or thrice and national income will be overestimated.
(iii) Non-marketed services: In estimating the national income, only those
services are included for which the payment is made. The unpaid services, or
non-marketed services are excluded from the national income.
(iv) Difficulty in assessing the depreciation allowance: The deduction of
depreciation allowances, accidental damages, repair, and replacement charges
from the national income is not an easy task. It' requires high degree of
judgment to assess the depreciation allowance and other charges.
(v) Housing: A person lives in a rented house. He pays
$5000 per month to
the landlord. The income of the landlord is recorded in the national income.
Let us suppose that the tenant purchases the same house from the landlord. Now
the income of the owner occupant has increased by $5000. Is it not
justifiable to include this income in the national income? Should or should not
this income be recorded in the national income is still a controversial
question.
(vi) Transfer earnings: While measuring the national income, it should be
seen that transfer payments should not become a part of national income. The
payments made as relief allowance, pensions, etc. do not contribute towards
current production. So they should be excluded from national income.
(vii) Self-consumed production: In developing countries, a significant part
of the output is not exchanged for money in the market. It is either consumed
directly by producers or bartered for other goods This unorganized and non-monetized
sector makes calculation of national income difficult.
(viii) Price level changes: National income is measured in money terms. The
measuring rod of-money itself does not remain stable. This means that national
income can change without any change in output.
Problems of Measurement is
Under Developed Countries:
The national income in under-developed countries like Pakistan,
Afghanistan, etc., cannot be
accurately measured due to the following reasons:
(i) Self-consumed-bartered consumption: Some of the transactions of
agricultural goods in the villages are done without the use of money. The
statisticians, therefore, cannot measure the exact amount of the transactions
for inclusion in the national income.
(ii) No systematic accounts maintained: Most of the producers do not keep any
record of the sale of the products in the market. This makes the task of
national income still more complicated.
(iii) No occupational classification: There is no occupational specialization in
the under-developed countries. People receive income by working in various
capacities. One person sometimes works as carpenter and at another time as
mason. The statisticians cannot accurately measure the income of such persons.
(iv) Unreliable data: The statisticians themselves do not feel the importance
of figures which they collect They also do not take much pains for getting the
reliable data. The figures of national Income are, therefore, not up-to-date in
the under-developed countries.
