Real national income
Also called: Real income · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 11, Ch 4 "Human Capital Formation in India"; Class 11, Ch 7 "Environment and Sustainable Development"
Meaning
Real national income is national income adjusted for price changes. It is valued at the constant prices of a base year, not at the prices of the current year. It shows whether the country is really producing and earning more, or whether prices have just gone up. Economic growth means a rise in a country's real national income.
Example
Suppose India's national income doubles in money terms, but all prices have also doubled. Real national income has not changed, so there has been no economic growth. Growth happens only when the amount of goods and services produced goes up.
Don't confuse with
- Nominal national income: this is valued at current prices, so it rises with inflation even when output does not grow.
- Per capita income: this is national income divided by population. It is an average per person, and it hides inequality.