Macro Economics

Practical difficulties in measuring national income in developing countries 

Developing countries like Nepal, Bhutan and India has always a great deal of difficulties in counting real national income than developed countries in the world. Some are outcome of social structure, some due technological defect or some are due to cultural and traditional belief. These kinds of difficulties are specific to those countries. It is important and relevant to us to know about those problems. They are discussed below:

a) Significant part of economy is un-monetized: Mostly developing country experiences agro-based economy. So, in such economic atmosphere considerable amount of agricultural outcome doesn't reaches to the market because mostly, these activities are self subsistence based. Hence, the correct estimation of nation income is kind of myth. 

(Source of image is internet)

b) Lack of professionalism: Enumerators or employee who are responsible in these region are hardly found updated with required skill. The services of these professionals is very important in estimating national income accurately with desired diligence and required capacity.  

c) Lack of proper education: Since, the economy is agro-based large part of calculation belongs to agricultural sector. Most of the farmers do not keep record of their production due to lack of right understanding.

d) Lack of occupational specialization: This is common finding in these region, people lacks occupational specialization. Hence, they move in various profession to get considerable income. This has made actual outcome of national income very difficult.

e) Fear to come under the rader of income tax policy: People like in Nepal hardly comes spontaneously to inland revenue office (or other tax departments) for the payments of tax. They believe tax is just a waste of money.

f) Restricted mindset: People of these countries and region have their own accepted believes. They are superstitious and therefore reluctant to disclose their income level. In addition, people will never mention amount if that is collected through illegal activities no matter how small is offence.

g) Widely flow of false information: This problem of misinformation comes in both developed and developing region. While in developed hardly false information is found recorded since advance technology is their to supervise economic activity. While only word of mouth remains in developing nation to record for national income. The fear to bear high tax cost they usually show involvement in few financial transaction.

h) Others:
                  i. Double counting
                  ii. Differentiation in calculating depreciation
                  iii. Non-marketed goods/services
                  iv. Changes in price level, etc.
                 

Happy reading!