Uses of National Income Estimation

1. To Know a Country’s Economic Growth Patterns

Income estimate is used to measure the performance of a country’s economy so as to know if the economy is progressing or regressing. This is known by comparing national income figures of that country over time.

2. To Know the Standard of Living of a Country

Per capital income is used to measure the standard of living. The higher a country’s per capital income, all things being equal, the higher the standard of living.

3. To Know the Structure of Production

The national income estimate shows the value of all productive activities in a country.

4. To Aid Development Planning

The national income estimate shows the contributions of each sector to the National Income figures. This information can be used as a guide to economic planning and planners can use them to forecast the future in the economy.

5. To Determine the Sectorial Contribution to the Overall Economy

The national income estimates show the productive capacities of the regions and states in a given economy as well as the various sectors.  The government, whose responsibility is to bring about equal distribution of income and resources among the various states or regions of the country, can also use the figures.

6. To Aid Re-Distribution of Income

The idea of differences in income is gained through national income estimates. This can be of help to the government in its fiscal policy (i.e. taxation and government expenditure) to redistribute income.