National Income

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National Income a measure of money value of all goods and services produced over a period of time, generally a year. The five different concepts of national income are Gross National Product (GNP), Net National Product (NNP), National Income (NI), Personal Income, and Disposable Income.

Estimation of National Income in Pakistan including in its eastern part started in the early 1950s through the setting up of the Central Statistical Office (CSO) in Karachi. Initially, the CSO used the concept of 'net national product at factor cost' and direct estimates of 'net value added' for some sectors. It also used expenditure approach in certain cases and an indirect method of estimating income accruing to the various factors of production. But the data were inadequate and a number of economic activities remained outside the purview of the national income accounts. The Pakistan National Income Commission, formed in 1965 to restructure national income accounting recommended more realistic methods for estimating national income with use of pragmatic ratios and coefficients. The GNP at constant market price in East Pakistan was Tk 11.57 billion in 1949-50 and Tk 13.29 billion in 1954-55. In these years the per capita income was Tk 267 and Tk 271 respectively.

Table Contribution of different sectors to national income (%).

Sectors 1972-73 1979-80 1989-90 1998-99
Agriculture 49.57 41.22 36.85 29.34
Mining and quarrying - 0.01 0.01 0.02
Manufacturing 7.91 11.23 8.75 9.05
Construction 4.39 4.75 5.84 5.95
Power, gas, water and sanitary 0.26 0.31 1.20 1.65
Transport, storage and communication 10.52 11.55 10.18 10.95
Trade services 7.97 9.78 8.35 9.05
Housing services 9.41 8.94 9.0 9.35
Public administration and defense 2.27 2.80 4.44 5.93
Banking and insurance 1.08 1.58 2.05 1.91
Professional and miscellaneous services 6.62 7.83 13.33 16.80

The basic methodology of estimating national income in Bangladesh in the early 1970s remained the same as it was in Pakistan and the responsibility of national income accounting was assigned to the Bangladesh Bureau of Statistics (BBS). The Bureau initially used the revised edition of the System of National Accounts (SNA) Manual of 1968 published by the United Nations Statistical Office. After 1975, BBS followed a mixed system with huge imputations comprising GDP estimation by industrial origin at current and constant (1972-73) prices. The method of estimating national income by BBS was based mainly on output. Under this method, also known as production method, the economy was divided into 11 sectors, for which the 'value added' at current prices was calculated, either from actual accounts or in case of data inadequacies, through imputing.

To provide support in conducting various tests and making projections for the Second Five Year Plan (1980-85), the Planning Commission set up a 47-sector input-output table in 1976-77. The Commission, by updating and improving the input-output table, continued to estimate the GDP at constant market prices every year on the basis of estimation of income in all these sectors. Unlike BBS, the Planning Commission first obtained the GDP estimate at constant factor cost for a year and then converted it into current value estimate by using deflators. BBS, however, made its own tentative estimates every year and these estimates were used by the Planning Commission for the preparation of the annual development programme (ADP) and finalisation of papers required for the aid consortium meetings and other negotiations on foreign aid. GDP estimates at both current and constant prices were made under the production method and the year 1972-73 was used as the base year for estimating GDP at constant prices. The base year was changed to 1984-85 in 1988-89.

Expenditures taken in account in calculating GDP comprises six components namely, private final consumption expenditure, government final consumption expenditure, changes in stock, gross fixed capital formation, export of goods and non-factor services and import of goods and services. Difference in methods used by BBS and the Planning Commission in estimating national income caused discrepancies in values of GDP in the short run. In view of the different time of publication and the difference in methodology, the two estimates were different both in absolute figures and in annual growth rates for the same year.

As both the pattern of output in the economy and the methodology of national income estimation underwent substantial changes in the 1980s, the government of Bangladesh set up a National Income Commission (NIC) on 10 March 1988. The NIC reviewed all the reports prepared by different domestic and foreign groups of experts and researchers, who, with funding support provided by agencies such as IMF, UNDP and ESCAP had rigorously studied the methodology of national income computation and an institutional framework for Bangladesh. It prepared a report on a comprehensive national income accounting methodology based on this review and the assessment of the adequacy of data and their collection process. The report was submitted to the government on 22 February 1990 with recommendations to be implemented gradually in three years. Major recommendations included a reorganisation of BBS and it's strengthening through improvement of skills and qualifications of manpower and proper delegation of responsibility. The NIC asked to complete the sample surveys of non-farm producing units using the frame obtained through the census of 1986. It also suggested collecting and analysing information on (a) private consumption, (b) year-end figures of stock in the hands of manufacturers, traders and other relevant economic units, and (c) private sector savings. With the assistance of the UN Statistics Division, BBS initiated a programme for step-by-step adoption of the SNA-1993.

Over the twenty years from 1972-73 to 1991-92, BBS followed its own National Accounting Framework for Bangladesh. The value added was calculated for eleven industries or activity sectors namely, agriculture comprising sub-sectors of crops, livestock, forestry and fisheries; mining and quarrying; manufacturing including large- and small-scale industry sub-sectors; construction; power, gas, water and sanitary services; transport, storage and communication including road, air and water transport, communication and storage and warehousing; trade services; housing services; public administration and defense; banking and insurance; and professionals and miscellaneous services including education, medical, legal profession, personal cares, religious, recreational, and entertainment and domestic and other services. In line with the budgetary and accounting practices of the government, the GDP estimates were made on financial year basis (i.e., for July-June period) and not on calendar year basis.

Statistics on contribution of different sectors to national income in Bangladesh (see table) show that over time, the share of agriculture in national income declined while that of professional and miscellaneous services and public administration and defense significantly increased. The shares of most other sectors, except power, gas, water and sanitation remained almost static. The share of manufacturing sector significantly increased between 1972 and 1980 but later declined. Further, despite an apparently high growth of economic activities in the sectors such as construction, housing, trade services and transport and communication, the shares of these sectors in the national income showed little increase during 1972-1999.

GDP of Bangladesh in current prices was Tk 49.85 billion in 1972-73 and amounted to four times the figure in 1979-80, about 15 times in 1989-90 and more than 48 times in 1999-2000. GDP at constant (1984-85) prices, however, showed a rate of growth much slower than that at current prices. GDP at constant prices was estimated at Tk 264.55 billion for 1972-73 and it rose to Tk 341.3 billion in 1979-80, to Tk 497.53 billion in 1989-90 and to Tk 1,493.36 billion in 1999-2000. Figures on GDP at current and constant prices for the 29 years between 1972 and 2000 suggest that the general price level in country rose at least 10 times during the period.

Since the FY of 2001-02, the increasing trend of gross domestic product, per capita on domestic product and national income on GDP were going to upward gradually. The per capita income (NI) has exceeded to US$ 700 in the FY of 2009-10. During this period, the gross national product rose to US$ 680. The contribution of agriculture sector in the gross national product climbed to 20.16%. But the achievement of industry and services sectors improved remarkably in the FY of 2009-10, the percentages of GDP on those sectors were 29.95 and 50.00 respectively. In average of past ten years, the GDP enlarged 18% measuring by the current market prize. As a result, the GDP went up to Tk 6,905.7 billion and the percentage of constant prize increased on average to 6, which is estimated to Tk 3,606.1 billion by the end of June 2010. During this period, the notable factors behind of hurried boosting up rate of GDP were strongly initiative for privatisation, liberalism on trade and industry sector through reformation, modernisation and relaxation on the transaction rate, and commandment and prohibition in the foreign investment, to offer various facilities in the private sector, and on the increase of inter-flow of foreign currency etc. Reasonably with the enlarged of GDP, the amount of savings and consumption has been improved in this time. It is seen that during the above mentioning time, the percentage of amount of consumption grew to 17. However, the rate of savings is going beyond the rate of expenditure, which is amounted to 21%. [Abul Kalam Azad]

See also income distribution.