National Income, Poverty and Unemployment

📘 NDA Economics · ECN03 📑 NDA Level : High Priority

This is a high-focus NDA chapter — definitions of GDP, GNP, NNP, poverty types, and unemployment types are all directly testable. Memorise the flow and the unemployment classifications.

📌 NDA Pattern: GDP vs GNP difference • NNP definition • Per capita income • Absolute vs relative poverty • Types of unemployment

1. National Income

GDP (Gross Domestic Product): Market value of all final goods and services produced within a country’s domestic territory in one year, regardless of who produces it.
GNP = GDP + Net Factor Income from Abroad (NFIA). Income earned by Indian nationals abroad minus income earned by foreigners in India.
NDP = GDP − Depreciation. NNP = GNP − Depreciation.
National Income = NNP at Factor Cost = NNP(MP) − Net Indirect Taxes.
Per Capita Income = National Income / Population. Average income; best indicator of living standard comparison across nations.
India’s GDP (FY25): ~6.4% real growth; nominal ~USD 3.8 trillion; 5th largest globally.

2. Poverty

Absolute Poverty: Income/consumption below a defined minimum threshold (poverty line). Cannot afford basic necessities (food, shelter, clothing). Measured by headcount ratio = (People below poverty line / Total population) × 100.
Relative Poverty: Income below a certain percentage of average national income. Measures inequality (being poor relative to others in society).
Poverty Line in India: Defined by per capita monthly expenditure. Currently revised by Rangarajan Committee (2014): Rural Rs 972/month; Urban Rs 1,407/month. Tendulkar Committee (2009) set earlier benchmarks. SECC (Socio-Economic Caste Census) used for identifying beneficiaries.
NITI Aayog MPI (Multidimensional Poverty Index): Covers deprivations in education, health, living standards (12 indicators). India’s 2023 MPI: 11.28% population multidimensionally poor (down from 29.17% in 2013-14 — 250 million people lifted from poverty in 9 years).

3. Unemployment

Frictional Unemployment: Temporary unemployment while people switch between jobs. Normal in a dynamic economy. Short-term; voluntary choice.
Structural Unemployment: Long-term mismatch between workers’ skills and available jobs due to technological change or economic restructuring. E.g., coal miners when coal industry declines.
Cyclical Unemployment: Due to economic recession/downturn. Demand for goods falls → firms lay off workers. Keynesian unemployment. Worst during economic depression.
Disguised Unemployment (Hidden): More workers engaged in a job than actually needed. Marginal product = zero. Most common in Indian agriculture (farming has more hands than required). Unique to developing economies.
Seasonal Unemployment: Work available only during certain seasons. Common in agriculture (post-harvest period), tourism.
Unemployment Rate in India: PLFS (Periodic Labour Force Survey) measures. CMIE (Centre for Monitoring Indian Economy) also tracks. Unemployment in India: ~7–8% (urban higher than rural).

📝 NDA PYQNational Income, Poverty & Unemployment — NDA Pattern

Q1. GNP equals GDP plus which of the following? (NDA I 2024)

(a) Depreciation (b) Net indirect taxes (c) Net Factor Income from Abroad (NFIA) (d) Government transfers

Answer: (c) Net Factor Income from Abroad (NFIA)
GNP = GDP + NFIA. NFIA = income earned by nationals abroad minus income earned by foreigners in India. Remittances from Indians working in Gulf, USA add to GNP. NNP = GNP − Depreciation. National Income = NNP at Factor Cost.

Q2. Disguised unemployment is most common in which sector of the Indian economy? (NDA II 2023)

(a) IT sector (b) Banking sector (c) Agriculture sector (d) Defence sector

Answer: (c) Agriculture sector
Disguised unemployment = more workers than needed; marginal product = zero. Indian agriculture employs ~44–46% of workforce but contributes only ~16% of GDP → structural issue. If 6 workers are doing work 4 could do, 2 are disguisedly unemployed.

Q3. Per Capita Income is calculated as: (NDA I 2023)

(a) GDP × Population (b) National Income / Population (c) GDP / Total workforce (d) GNP / Number of households

Answer: (b) National Income / Population
Per Capita Income = NI / Population. It measures average income per person and is used for international comparison of living standards. India’s per capita income ~Rs 1.72 lakh/year (FY24). Luxembourg, Switzerland, USA have highest per capita incomes globally.

📝 Rapid Revision — ECN03

📊 NI Formulas

GNP = GDP + NFIA
NDP = GDP − Depreciation
NNP = GNP − Depreciation
NI = NNP at Factor Cost
Per Capita = NI / Population

📋 Unemployment Types

Frictional = between jobs (short-term)
Structural = skills mismatch (long-term)
Cyclical = due to recession
Disguised = more workers than needed (Indian agriculture)
Seasonal = only in certain seasons (agriculture, tourism)

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