1.1. Significance of National Income Accounting

♤ International Comparison: National Income Accounting measures growth rate and development of nations, which can be used to compare standard of living of different countries.

♤ Business Decisions: It reflects the relative contribution and potential of various sectors of the economy which guides the business class to plan for future production.

♤ Policy Formulation: It throws light on the distribution of income and resources in the economy, which helps government in proper allocation of resources to bring equality and development in nation.

♤ Policy Evaluation: The income accounting identifies specific economic achievements and failures which helps people of the nation in evaluating the policies of the government.

♤ Annual Budget: It shapes the budgetary policy of the Government, makes the borrowing and tax policy in order to neutralize the fluctuations of income and employment. The government takes to deficit or surplus budget to arrest depression or inflation in an economy.

♤ National statistics gives clear picture of how the national expenditure is divided into investment and consumption.