The following points highlight the four special difficulties faced in calculating the national income of under developed economies. The difficulties are: 1. Self-consumed, Bartered Production 2. No Systematic Accounts 3. Multiple Occupations 4. Unreliable, Fabricated Data.
Difficulty # 1. Self-consumed, Bartered Production:
A good portion of the produce is not brought to the market to be exchanged with the measuring rod of money.
It is either consumed directly by the producers or is exchanged for other goods and services.
Only rough estimates are made about this part of the produce. This difficulty is mostly in rural areas in agricultural sector of the economy. Much reliance, therefore, cannot be placed on the national income figures thus obtained.
Difficulty # 2. No Systematic Accounts:
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Large number of producers does not keep any accounts of their produce because most of them are illiterate. They mostly produce for self- consumption, not for the market. Thus, the national income estimates are based merely on oral inquiries from these producers and are not dependable as such.
Difficulty # 3. Multiple Occupations:
It is very difficult to estimate the national income of India by industrial origin because there is little specialisation of functions; occupational classification is not scientific. People have been found engaged in a number of economic activities simultaneously.
Difficulty # 4. Unreliable, Fabricated Data:
Besides, there are statistical difficulties in computing national income of India. Reliable statistics are not available, if these are available, these are not dependable. In underdeveloped countries many facts and figures essential for the income method are either lacking, or cover only a small proportion of the population.
Same applies to statistical compilations (like censuses of production), available in advanced economies. Recourse has to be made, therefore, to ‘mixed method’, i.e., the combination of inventory method and income method.