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The measurement of national income is beset with difficulties. In under developed countries these difficulties are more prominent. The difficulties in calculation of national income can be discussed as follows:·
Conceptual difficulties: there has been a difference of opinion regarding the term ‘nation’ in the concept of national income. It has to define exactly, whether it is geographical entity of the country or the nationals including those residing abroad. Since national income constitutes a quantitative measure of economics activity rather than verbal description. Since everything has to be equated to the money value, services produced in economy for love of humanity, affection and philosophy could not be taken into consideration in calculating national income.· Overlapping of occupations: in backward economies there is an overlapping of occupation in rural sector which makes it difficult to know the income by origin. A worker in a peak season works in a farm, drives a country cart in off season. Takes up unskilled work, etc. similarly, the village money lender combines his profession with the cultivating of his farm.·
Difficulty in value estimation: in backward areas, the cultivators, artisans and cottage industry workers do not have a fair idea of the expenses of their occupation. Hence the net value of their products cannot be estimated precisely.·
Non- monetized sector: barter dealing and non-monetized sector creates the problem of inputting the value of their produce and services and by guess work and approximation.· Incomplete government records: due to ignorance and illiteracy in backward areas, the data may not be available and if available, may be unreliable. Also, the figures furnished by government officials may not be from reliable sources and data is not current.·
Problems in agricultural sector: in agricultural activities there is a good deal of guess work in data relating to cropwise production and in figures relating to animals and forest products.· Problems in industrial sector: data relating to output, cost, etc. are available only in big units. The small units do not maintain these figures correctly. The village money lenders and indigenous bankers maintain absolute secret of their and they do not furnish correct information.·
Non-applicability of a uniform formula: in a big country where wide disparities and regional differences, a uniform formula cannot be applied. The data of one region cannot be applied to another region with minor modification. Every region would be a separate entity requiring specialized approach suited only to that region.·
Double-counting: the error of double-counting is another obstacle to be avoided in the calculation of national income.·
Inefficient data collection: the machinery for collecting statistical data may not be efficient. The investigators, preparation of adhoc figures, making sample surveys, etc.
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Non-availability of statistical material
The danger of double counting
Non-marketed services
Difficulty in assessing the depreciation allowance
