Introduction:

National income accounting is not an easy task .A number of difficulties arise in the measurement of National income. Some of the difficulties in the estimation of national income are discussed below.

Difficulties in the Estimation:

1. Transfer payments: Payments made by government such as old age pension, widow pension, unemployment benefits, scholarship etc. are called transfer payments. Whether such payment should be included in national income is a difficult questions these are a part of individual income as well as a part of government expenditure therefore this transfer payments are ignore from national income.
2. Income of foreign firms: Another problem is with regard to the income generated by foreign firm. The IMF is of the opinion that the income of the foreign firm should be included in the income of the country where it is located. However profits earn by foreign firms should be credited to the parent country. For example the income earn by Microsoft in India should be credited to the income of India. But the profits earned by it should be credit to the income of USA.
3. Treatment of government services: Government provides various public services like defense, administration and justice etc. it is difficult to measure the value of such services therefore the value of such services Treated as equal to the amount of wages and salaries by the government to its employees.
4. Unpaid services: National income is always measured in terms of money but there are number of goods and services for which money is not paid for example Sweaters, basket, embroidered works made as a part of hobby. Services of housewife, charitable institution and NSS students etc. they are not included in national income but if the same good and services are produced for sale they are included in national income this leads to under estimation of national income.
5. Income from illegal activities: Some people obtain income from illegal activities such a smuggling, gambling, illicit black marketing etc. these activities generate income, but since activities are illegal such income is excluded from national income this reduces the actual value of national income.
6. Change in general price: Change in the price level also makes accurate estimation of national income difficulties. This is because when general price rise, the national income in money terms increases even though the national output remains same. Similarly if prices for the national income in money terms decreases. Even though the national output remains constant.
7. Production for self consumption: In developing countries like India farmers keeps the large portion of agriculture produce like fruits, grains etc. for self consumption such goods do not enter the market. Farmers do not maintain any accounts regarding the value of such produces the actual value of national income.
8. Problem of double counting: A major problem in calculating national income is that of double counting. This is because it is very difficult to distinguish between final goods and intermediate good therefore, the problem of double counting cannot be avoided this causes for estimation of national income.
9. lack of reliable data: In developing country it is difficult to get reliable data regarding the value of production or income related to agriculture, fishery petty shopkeepers, money lenders etc. because they are unwilling to maintain correct data besides illiteracy and ignorance of the people also stand as a major block.
10. Lack of occupational specialization: Sometimes people are engage into one or two or more occupation. For example in rural areas, people earn income partly from farm work and partly from work in industries. In offseason a school teacher may also be getting income from his agriculture land. This lack of occupational specialization makes estimation of national income difficult.

also read: explain the Says law of markets.