What is National Income Statistics?
According to most dictionaries, national income is literally the total amount of money earned by a certain country. But in order to calculate the total funds and asset of the country, National Income Statistics are used, which are basically a set of rules, techniques and calculation to measure the total value of final goods and services produced. However, The National Income Statistics are only valid to calculate the national income of a country in a year.
The Uses of National Income Statistics
Like every other calculations, The National Income Statistics also have their own uses. The National Income Statistics are very important to the development of a certain country as it is the result of hard works done in a year to contribute in the enhancement of a certain country.
Firstly, as we all know money and riches usually determines the standard of living of a certain someone. For a country, there is also no difference because the total National Income earned by a country will show its quality and standards. Generally, countries with higher National Income has higher standard of living. For instance, United Kingdom has a higher national income than The Republic of Ireland; therefore, it shows that United Kingdom has the higher standard of living.
The next benefit of the National Income Statistics is that it can be used for comparison over time. Every country will keep all their records of national income statistics in order compare year by year to determine whether the country is progressing, stagnating or deteriorating. In case of stagnating or deteriorating, governments and citizens will take notice and actions will be demanded immediately to improve the country’s national income. For example, Iran whose economics are deteriorating, as a result, government of their country is finding ways to solve their economic problems.
Moreover, as stated before, the total amount national income of a country is generally a status and could prove the country’s profile and development. Thus, national income statistics will cause comparison between countries. Judging and comparing may be against morality as competitions will normally cause conflicts. Yet, by comparing their national incomes, countries will be able to identify and differentiate their countries’ with developed countries and as a result the developing countries could emulate economic policies and strategies of developed countries to improve their economic growth and productivity. For instance, China whose national income was not that desirable in the twentieth century has emulated the economic strategies used by developed countries like Japan and gradually boosted their economics over the years, becoming one of the world’s powerhouse today.
As we all know, inflation is one of the most feared issue by countries across the globe. Inflations are sometimes unpredictable and could lead to depreciations in currencies, or worse, a financial crisis. Fortunately, people around the world are now able to use the national income statistics to solve this issue, which lead us to the fourth uses of the national income statistics, the potential to predict inflations or deflations. Economists nowadays are capable to predict the economic standard of countries by comparing their national income statistics with previous ones. With this, economists can identify the inflation and deflation gap and try to predict the forthcoming economic activities, though the prediction may not be perfectly accurate, but, the data could help governments to implement anti-inflationary or anti-deflationary measure to stabilize the value of money.
Besides that, the national income statistics also largely contributed in the three main sectors of economics, which is the primary sector, secondary sector and tertiary sector. The primary sector is the sector which involves in making direct use of natural resources, such as fishing and mining; the secondary sector involves in taking the output of the primary sector to produce finished goods, like, manufacturing and constructing; the tertiary sector though, is also known as the service sector, for instance, government services and electricity providers are tertiary sectors. What the national income statistics do is that it can identify the sectors that have contributed more to the economic growth. As a result, governments could focus on the sectors that have contributed little and improve it in the following year.
The fact that the national income statistics contains the figures of consumption, savings, investments, imports and exports has enabled people to identify the relative performances of both the public and private sectors in an economy. For example, figures shown by the national income statistics could let us identify whether public and private sectors of our country are developing. In addition, the expenditure pattern shown can also tell us the type of economic system the country is practicing. For instance, if most of the activities are performed by state, we could conclude that the public sector is playing a dominant role in a centrally planned economy.
National income statistics too play a major role in the process of national planning as it shows information from consumptions to incomes and also performance of every sector in our country. With this, governments could formulate our country’s economic planning as in short term or long term. For example, with national income statistics, governments could estimate our country’s income for the following year, thus, making them capable of formulating future economic policies for future developments. Just like in the case of us, where financial planning is essential for our future, as in national income statistics is a tool for financial planning, it could be used to forecast future developments based on economic performances. In India, the government uses the national income statistics to draft the country’s future plans for up to five years.
In conclusion, national income statistics is essential to every country as it largely contributed in the development of economics. The national income statistics till today still play a major role for future development and has consistently delivered the benefits mentioned above. Therefore, it is compulsory for future generations like us to practice and study the concepts of national income statistics to contribute in the development of economics of our country.