5.6. Difficulty of Measurement (With Special Reference to India)

Economists face a number of problems while calculating the National Income some of them are:

a) Non-Monetization of transactions: When National Income is calculated it is generally assumed that any products or services would be exchanged for money. But in India especially in rural areas, a large number of economic transactions occur in the form of barter. Such activities are difficult to account for in the GDP estimates therefore resulting in lower levels of GDP than actual.

b) Unreported Illegal Income: A major part of Indian Economy operates as hidden or parallel economy and the income generated in this goes unreported. As per a study, black economy accounts for about 40% of total income generated in the country. This poses a great problem to calculate accurate GDP estimates.

c) Non-availability of data about households, small producers etc.: A large number of producers carry out production at a family level or run household enterprises. Data about these enterprises is very difficult to find. NIA does not include care economy such domestic work and housekeeping. Even the valuable work done by housewives in India is not accounted as a part of GDP estimates.

d) Absence of data on growing service sector: In India, service sector has witnessed an exponential growth rate. However, value addition in several parts of service sector industry are not based on accurate reporting and hence underestimated in national income measures.