What are problems in measuring the national income of India?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Measurements of national income (such as Gross Domestic Product) are always somewhat problematic.  This is especially true in developing countries.  The major problem is that such countries suffer from underreporting of their national income.  The problem comes from the definition of GDP.

GDP only counts the value of goods or services sold on the legitimate market.  It does not count goods or services sold in the "informal sector" where transactions are not reported to the government.  It also does not count work done that is not paid.

India has problems with both of these.  It has a large informal sector.  In addition, rural women, especially, do a great deal of unpaid labor.  Both of these make it difficult to accurately measure India's national income.

 

readerofbooks's profile pic

readerofbooks | College Teacher | (Level 2) Educator Emeritus

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That is a great question and problems with GDP measurement are not only an issue with India, but other countries as well. One immediate problem is that India is a large country and the infrastructure is not great. In other words, it is difficult to collect data without the proper agencies in place. In addition to this, the country has a population of over a billon. A mere census would be a challenge, let alone to measure GDP. Finally, i would say that many transactions take place "under the table." And these transactions will not show up in a countries GDP and in such a large country, like India, this number might be considerable.

lit24's profile pic

lit24 | College Teacher | (Level 3) Valedictorian

Posted on

The website, http://www.tradechakra.com/indian-economy/national-income.html explains in detail the problems in calculating the national income of India:

Difficulties in Calculation of National Income:
In India there are various difficulties in calculating the national incomes .The most severe one is the finding of reliable data. Most of the time, it is based on assumptions. Soon after independence the National Income Committee was formed to collect data and estimate National Income. The two major problems which remain in the calculation of National Income are:
  • Most of the data is not from the current year.
  • Even if current data are available then values are underreported.

The most obvious reasons are of course the vast area, the huge population, the unorganized sector [child labor, domestic servants etc.], the black market, crime and prostitution and human trafficking.

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