Methods of Measuring National Income

India's National Statistical Office estimates national income by combining three internationally recognised approaches, cross-checking one against another wherever data permits.

1. Product (or Value Added) Method — sums the value added by every productive enterprise, industry by industry (agriculture, mining, manufacturing, trade, services, and so on), after removing the value of intermediate inputs to avoid double counting:

This method works best where output data is relatively reliable — agriculture and organised manufacturing.

2. Income Method — sums the incomes earned by the owners of the factors of production employed in producing that output:

Adding net factor income from abroad converts this domestic total into National Income (NNP at factor cost). This method is used mainly for the organised sector, where wage and profit records exist.

3. Expenditure Method — sums all final expenditure on domestically produced goods and services:

$Y = C + I + G + (X - M)$ …