...INDIA..






MACRO ECONOMIC IDENTITIES


GNP & GDP
GNP=GDP+NFIA

(NFIA is Net Factor Income from Abroad=factor income received from abroad-fact income paid abroad)

GDP=GNP-NFIA


GNP &GDP are calculated at Market Price (MP)& Factor Cost (FC)
The difference between MP&FC is Net Indirect Tax (NIT) i.e.,

MP = FC + NIT
FC = MP – NIT
NIT is added to MP & deducted in FC

NIT = Indirect Tax - Subsidies




Tax on goods & services are Indirect Tax
Subsidies are provided by the Govt.

Therefore,

GNPmp = GDPmp + NFIA
GDPmp = GNPmp – NFIA
OR
GNPmp = GNPfc + NIT
GDPmp = GDPfc + NIT



GDPfc = GNPfc – NFIA
GNPfc = GDPfc + NFIA
OR

GDPfc = GDPmp – NIT
GNPfc = GNPmp - NIT
NNP & NDP
NNP = GNP – D (D=depreciation)
NDP = GDP – D

NNPfc = NNPmp – NIT
NNPfc is the National Income

NNPmp = NNPfc + NIT

PERSONAL INCOME
The part of National Income received by households is PI
PI = NI – Undistributed profits – Net interest payment made by households – Corporate tax + Transfer payments.
A part of profit not distributed among factors of production is UP.
Tax on the profit of firms is Corporate tax.

TRANSFER PAYMENTS
Unilateral payments without any quid-pro quo.
(quid-pro-quo means “expecting anything in return”)
For example – Pensions, scholarships, etc.

TPs are Current Transfer & Capital Transfer.
Current Transfer are the transfer for current consumption. e.g., pensions, scholarships,etc.

Capital Transfer are the transfer for Capital formation. e.g., financial assistance for infrastructure


PERSONAL DISPOSABLE INCOME
PDI = PI – Personal Taxes –
Non-Tax payments.
NATIONAL DISPOSABLE INCOME
NDI = NNPmp + Other Current transfers from the rest of the world

NDI gives an idea of the maximum amount of goods & services the domestic economy has at its disposal.

Gifts & aids are example for Current transfers from the rest of the world.