Private income
Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"
Meaning
Private income is the total income from all sources that reaches the private sector, which means households and private firms. It includes both factor income and transfers.
Private income = factor income from NDP accruing to the private sector + national debt interest + NFIA + current transfers from government + other net transfers from the rest of the world
National debt interest is the interest the government pays on its borrowings.
Example
A family earns wages from a private factory, which is factor income. It receives interest on government bonds (national debt interest) and a pension from the government (a current transfer). It also gets a gift from a relative abroad (a transfer from the rest of the world). All of these count in private income.
Don't confuse with
- Personal income: private income also covers private firms. Personal income is what reaches households only, after the profits firms keep and corporate tax are taken out.
- National income: this counts only factor incomes. It leaves out transfers and income earned by the government sector.
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