Net interest payments by households
Also called: NIH · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"
Meaning
Net interest payments by households are the interest households pay to firms and the government, minus the interest they receive from firms and the government. When households work out their personal income, this amount is subtracted from national income. If households receive more interest than they pay, the figure is negative, and subtracting it increases personal income.
Net interest payments by households = interest paid by households − interest received by households
Example
Households pay ₹1,200 crore of interest and receive ₹1,500 crore. Their net interest payment is 1,200 − 1,500 = −₹300 crore. Subtracting −300 from national income adds ₹300 crore to personal income.
Don't confuse with
- Interest as a factor income: interest paid on capital used in production is already part of national income. This item only adjusts for the interest that flows between households on one side and firms and the government on the other.
Related concepts
- Gross National Product
- Net factor income from abroad
- Normal residents
- Domestic territory
- Net Domestic Product
- NDP at factor cost
- Net National Product
- GNP at factor cost
- National income
- Personal income