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National Income Analysis: Top 7 Importance

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The following points highlight the top seven importance of national income analysis. The importance are: 1. For the Economy 2. National Policies 3. Economic Planning 4. Economic Models 5. For Research 6. Per-Capita Income 7. Distribution of Income.

Importance # 1. For the Economy:

National income data are of great importance for the economy of a country. These days the national income data are regarded as accounts of the economy, which are known as social accounts.

These refer to net national income and net national expenditure, which ultimately equal each other Social accounts tell us how the aggregates of a nation’s income, output and product result from the income of different individuals, products of industries and transactions of international trade.

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Their main constituents are inter-related and each particular account can be used to verify the correctness of any other account Based very much on social accounts, the national income data have the following importance.

Importance # 2. National Policies:

National income data form the basis of national policies such as employment policy because these figures enable us to know the direction in which the industrial output, investment and savings’ etc. change, and proper measures can be adopted to bring the economy to the right path.

Importance # 3. Economic Planning:

In the present age of planning, the national data are of great importance. For economic planning, it is essential that the data pertaining to a country’s gross income, output, saving and consumption from different sources should be available.

Without these, planning is not possible. Similarly, the economists propound short-run as well long-run economic models or long-run investment models in which the national income data are very widely used.

Importance # 4. Economic Models:

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Economists build short-run and long-run economic models in which the national income data are widely used.

Importance # 5. For Research:

The national income data are also made use of by the research scholars of economics, they make use of the various data of the country’s input, output, income, saving, consumption, investment employment, etc., which are obtained from social accounts.

Importance # 6. Per-Capita Income:

National income data are significant for a country’s per capita income which reflects the economic welfare of the country. The higher the per capita income, the higher the economic welfare and vice versa.

Importance # 7. Distribution of Income:

National income statistics enable us to know about the distribution of income in the country. From the data pertaining to wages, rent, interest and profits we learn of the disparities in the incomes of different sections of the society.

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Similarly, the regional distribution of income is revealed it is only on the basis of these that the government can adopt measures to remove the inequalities in income distribution and to restore regional equilibrium. With a view to removing these personal and regional disequilibria, the decisions to levy more taxes and increase public expenditure also rest on national income statistics.

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