Difficulties in the measurement of national income?

A number of difficulties arise in the measurement of national income. Following are the main difficulties associated with the measurement of national income in less developed countries.

1.                 Lack of statistical data:

In the less developed countries people keep no record of their income and expenditure consequently there is lack of accurate statistical data and information, which deprive national income from exact measurement.

2.                 The danger of double counting:

While computing the national income, there is always the harmful of double counting. If care is not taken then the national income will be over-estimated.

3.                 Lack of trained staff:

In the less develop countries including Pakistan. There is lack of statistician and mathematician. The information regarding different sectors of the economy is usually collected by the untrained workers. So a number of errors take place during the collection of data and information, which deprives national income from excel measurement.

4.                 Transfer earning:

Transfer earning should not be included in the estimation of national income, because the payments made as relief allowance, pension etc. do not contribute towards current in the production. But sometime they are added in the estimation of national income due to lack of knowledge which again deprive national income from exact measurement.

5.                 Non-marketed services:

 In estimating the national income only these services are included for which the payment is made. The without payment services are excluded from national income, which create a problem in the estimation of national income.

6.                 Self consumed production:

In the developing countries a significant part of the output is not exchanged for money in the market. It is either consumed directly by producers or bartered for other goods. This unorganized or non-monetized sector makes calculation of national income difficult.

7.                   Different sectors of the economy are usually mixed with one another.

Similarly sometime people are engage in different sectors of the economy at the sometime e.g. farmers during off seasons engage themselves in other sectors like industrial, transport and communication etc, and consequently excel information regarding their income and is not possible.