The following points highlight the top eleven reasons for growing importance of national income studies in recent years. The reasons are: 1. Economic Policy 2. Economic Planning 3. Economy’s Structure 4. Inflationary and Deflationary Gaps 5. Budgetary Policies 6. National Expenditure, 7. Distribution of Grants-in-aid and Others.

Reason # 1. Economic Policy:

National income figures are an important tool of macroeconomic analysis and policy.

National income estimates are the most comprehensive measures of aggregate economic activity in an economy.

It is through such estimates that we know the aggregate yield of the economy and can lay down future economic policy for development.

Reason # 2. Economic Planning:


National income statistics are the most important tools for long-term and short-term economic planning. A country cannot possibly frame a plan without having a prior knowledge of the trends in national income. The Planning Commission in India also kept in view the national income estimates before formulating the five-year plans.

Reason # 3. Economy’s Structure:

National income statistics enable us to have clear idea about the structure of the economy. It enables us to know the relative importance of the various sectors of the economy and their contribution towards national income. From these studies we learn how income is produced, how it is distributed, how much is spent, saved or taxed.

Reason # 4. Inflationary and Deflationary Gaps:

National income and national product figures enable us to have an idea of the inflationary and deflationary gaps. For accurate and timely anti- inflationary and deflationary policies, we need regular estimates of national income.

Reason # 5. Budgetary Policies:

Modern governments try to prepare their budgets within the framework of national income data and try to formulate anti-cyclical policies according to the facts revealed by the national income estimates. Even the taxation and borrowing policies are so framed as to avoid fluctuations in national income.

Reason # 6. National Expenditure:


National income studies show how national expenditure is divided between consumption expenditure and investment expenditure. It enables us to provide for reasonable depreciation to maintain the capital stock of a community. Too liberal allowance of depreciation may prove harmful as it may unnecessarily lead to a reduction in consumption.

Reason # 7. Distribution of Grants-in-aid:

National income estimates help a fair distribution of grants-in-aid by the federal governments to the state governments and other constituent units.

Reason # 8. Standard of Living Comparison:

National income studies help us to compare the standards of living of people in different countries and of people living in the same country at different times.

Reason # 9. International Sphere:

National income studies are important even in the international sphere as these estimates not only help us to fix the burden of international payments equitably amongst different nations but also enable us to determine the subscriptions and quotas of different countries to international organisations like the UNO, IMF, IBRD. etc.

Reason # 10. Defence and Development:


National income estimates help us to divide the national product between defence and development purposes. From such figures we can easily know how much can be spared for war by the civilian population.

Reason # 11. Public Sector:

National income figures enable us to know the relative roles of public and private sectors in the economy. If most of the activities are performed by the state, we can easily conclude that public sector is playing a dominant role.