Question

Discuss national income as an indicator of economic development.

Answer 1

Growth-rate of national income:

• National income as an indicator of development says that a country is said to have attained economic development if there is a continuous increase in the real national income of the country for a long period of time.
• According to this indicator if the rate of rise in national income is high the development rate is said to be high and if the rate in rise of national income is slow, the rate of development is low.
  Moreover, if the national income does not rise it means that the country’s development is stagnant whereas if national income decreases, it indicates that there is underdevelopment or negative development.
• For calculating this indicator ‘real income’ and not ‘money(nominal) income’ is taken into consideration. As a result, national income is calculated not at current prices but at constant prices.
  Tabular representation of national income as an indicator of development:
• Some countries have a faster growth-rate of national income compared to other countries. Hence, we can also say that even the economic development in such countries will be faster.
• Table given below shows that countries like Norway, America, Sri Lanka and Pakistan have slower annual growth rate of national income compared to India.
• Although today India is considered to be one of the fastest developing countries of the world but, it should be noted that countries like Norway and America have already grown drastically in the past. Hence, their growth now appears smaller at 2 to 3% per annum compared to that of India which is 7.3%.

Country	Annual growth rate of national income (in %)
Norway	2.2
America	2.4
Sri Lanka	4.5
China	7.3
India	7.3
Pakistan	4.7