Meaning:

The total income of the nation is called national income. The aggregate economic performance of the whole economy is measured by the national income data. In fact national income data provides summary statement of a country aggregate economic activity. In real times national income is the flow of goods and services produced in an economy in a particular period of time, in short national income is the value of goods and services produce during a given counted  without duplication. The importance of estimation of national income is very important for all kinds of economies.

Definition: According to National income committee of India 1948 “a national income is generally defined as some total of all the final goods and services produced in a country and net income from abroad in a year.

Importance of Estimation

• Useful to business organization: The business organization can know of their contribution to industries product or National product. On the basis of this information they take decision whether they should change the output to suit the requirement of the economy. National income account helps them in deciding what to produce.
• Helpful in international and inter regional comparison: National income account help comparison of income, consumption and capital formation of different countries as well as of different region within the country.
• Important for economic analysis: National income accounts are helpful in analyzing the functioning growth and structure of the economy this helps in analysis of factor which influence economic growth.
• Helpful in economic planning: National income accounts help in economic planning. The planning commission comes to know about the resources available for economic planning. according to the planners fix the target of growth  for different sector as well as the overall rate of growth.
• Economic Indicator: National income serves as a key economic indicator that reflects the overall health and performance of a country’s economy. It provides insights into the level of economic activity, growth rate, and overall prosperity.
• Policy Formulation: Governments use national income data to formulate and evaluate economic policies. By analyzing trends in national income, policymakers can make informed decisions regarding fiscal and monetary policies to stimulate growth, control inflation, or address unemployment.
• Resource Allocation: National income data helps in the allocation of resources within an economy. It enables policymakers and businesses to identify sectors that are growing or declining, allowing for better resource allocation and investment decisions.
• Standard of Living: National income per capita is often used as a measure of the standard of living within a country. It provides an indication of the average income levels and purchasing power of individuals, which is essential for assessing the overall welfare and well-being of the population.
• International Comparisons: National income data allows for comparisons of economic performance across different countries. This facilitates benchmarking and helps countries assess their relative position in the global economy, identify areas for improvement, and learn from the experiences of other nations.
• Distributional Analysis: National income computation includes data on income distribution, which is essential for analyzing income inequality within a society. Understanding the distribution of income helps policymakers design targeted interventions to address disparities and promote inclusive growth.
• Forecasting: National income data is used by economists and analysts for forecasting future economic trends. By examining past patterns and current indicators, forecasts can be made about future economic growth, inflation, employment levels, and other key variables, aiding businesses, policymakers, and investors in their planning and decision-making processes.
• Economic Stability: Monitoring changes in national income helps policymakers assess the stability of the economy. Sudden fluctuations or downturns in national income may indicate underlying weaknesses or imbalances in the economy, prompting policymakers to take corrective measures to maintain stability.

also read: explain the methods of estimation of national income.