Friday, February 10, 2012

What are problems in measuring the national income of India?

Measurements of national income (such as Gross Domestic Product) are always somewhat problematic.  This is especially true in developing countries.  The major problem is that such countries suffer from underreporting of their national income.  The problem comes from the definition of GDP.


GDP only counts the value of goods or services sold on the legitimate market.  It does not count goods or services sold in the "informal sector" where transactions are not reported to the government.  It also does not count work done that is not paid.


India has problems with both of these.  It has a large informal sector.  In addition, rural women, especially, do a great deal of unpaid labor.  Both of these make it difficult to accurately measure India's national income.

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