Rajasthan Board RBSE Class 10 Social Science Notes Chapter 14 Economic Concepts and Planning
A nation’s income can also be determined as we determine an individual or family.
Calculation of national income is important because it gives knowledge about economic condition and economic growth, it is helpful in comparing various countries, and gives information about
contribution and importance of various economic sectors in the economy apart from this future planning can be done for the economy.
National income is defined as monetary value of production of final goods and services produced in a given period by a country.
Final goods and services are the ones which cannot be reprocessed. It means no economic value is to be added to it. In other words it can be said that final goods and services are those which are used either for final consumption (by consumer or households) or for final investments by a firm. For example: sugar when used by household is a final good. Machinery purchased by a firm is also a final good.
All the resources of a country with their joint efforts produce certain value of final goods and services, which is equal to the increase in value in a country.
Increase in value (monetary terms) is distributed among various factors of productions, which is called as factor income. Factor income refers to the income which is received as reward for the factor services in the process of production. For example: rent, wages/ salaries, interest and profits.
Factors of production are the factors which are used in the process of production. No production can be done without the use of land, labor, capital and entrepreneurship. These are called as the factors of production.
Owners of these factors are called as factor owners. Land receives rent, labor receives wages/ salaries, capital receives interest and an entrepreneur receives profit.
Production done by resources is always equal to income received by them. So, we can say that, production is equal to income or gross national income is equal to gross national income.
Income received from production process in a financial year, by all factors of production is called as national income. It is the sum total of gross domestic product and net factor income from abroad. It can also be defined as sum total of factor income generate within the domestic territory of a country inclusive of net factor income from abroad during a period of one year, you will study concept of domestic territory in higher classes.
National Income ( NNPfc) = GDPfc + Net factor income from abroad (NFIA).
Gross domestic product (GDPfc) refers to the sum total of factor income generated within the domestic territory of a country of a country in an accounting year.
Net factor income from abroad (NFIA) means the factor income which the economy earns from rest of the world. It can be calculated by subtracting factor income to abroad out of factor income from abroad.
We have variety of national income concepts like- gross domestic product, net domestic product, gross national product, net national product etc. National income is not an appropriate criterion to measure the economic welfare as it does not include the impact of population change. Per capital income is the more appropriate one.
To calculate per capital income, national income is divided by population of the country.
PCI = National income/population
If national income of any country be 100000, its population be 1000, then is per capital income will be, 100000/1000 = 10000 ₹
For the first time national income for India was calculated by Shri Dada Bhai Naoroji in 1868. Thereafter, Findley Shiraj, Dr. V.K.R.V. Rao, R.C. Desai etc used various ways and basis. After independence a national income committee was formed in 1949, headed by Shri Mahalnobis. It presented its first report in 1951 and final report in 1955.
After 1955, the task of calculation of national income was given to Central Statistical Organisation (CSO).
There are three sectors in the economy; these sectors are divided on the basis of activities performed under it. These sectors are named as- primary sector, secondary sector and tertiary sector.
Primary sector is a sector in which natural resources are utilized to produce goods. The activities performed under it are called as primary activities. It includes activities like – cultivation, mining, animal husbandry, dairy, fishing etc. It is also called as agricultural and allied sector.
Secondary sector is a sector products of primary sector which are used as raw material and are converted into different forms by the means of manufacturing. For example – textile industry, here cotton is used as a raw material and is converted into fabric. Similarly we have iron and steel industry where iron ore is used as raw material and converted into iron/ steel rods and sheets. It is also called as industrial sector as it includes various types of industries.
Tertiary sector refers to the sector where services are produced. For example – telecom services, postal services, banking services, education services etc. It includes services which do not directly help in production. It is also called as service sector.
As the economy develops people start shifting from primary to secondary or tertiary sector. Because of this reason we find that in underdeveloped country, people are more engaged in primary sector and in developed or developing nations people are more engaged in other two sectors.
In India all three sectors have increased production, but the highest is recorded in tertiary sector. Though the production has raised but no much of change is seen in occupational structure. Still majority of people are engaged in primary sector (50%) then too its contribution in gross domestic production is less than 15%. Whereas, other two sectors contributes to more than 85%.
Increase in per capital income with respect to time is defined as economic growth. But it is not the only tool for growth. Along with income people require security, respect, education, health etc.
Economic development is the process in which real national income and per capital income increases along with favorable changes in social, cultural and economic structure.
Sustainable development refers to the development that meet the needs to the present generation without compromising the ability of future generation to meet their own needs.
Development in such a manner that reaches benefit of development to all the sections of the society. It emphasis on bringing deprived sections of the society into main stream.
Human development index includes important dimensions like knowledge, health and standard of living. It came into existence in 1990.
Planning is a technique in which resources are utilized and allocated as per the priorities to achieve the objectives. For the first time the technique was adopted by Soviet Union in 1928. Sir M. Vishveshwawiya did the first attempt in Indian history of economic planning in 1934.
Planning commission was set up by Indian government in 1950. To determine the objectives and priorities and allocate the resources was the important task of the commission. Planning commission works under the guidance of national development council established in August 1952. It is a constitutional advisory body.