National income as measure of economic welfare
The factors which are not taken jnto consideration in computing GNP are as follows:
a) Leisure: An important element affecting welfare of community is amount of leisure enjoyed by its members. But leisure is not included in GNP. If the GNP is produced after reducing the working hours of labour, it can be said that welfare has increased.
b) Quality of life : GNP estimates don't include quality of life as component. With increase in GNP, quality of life is bound to go down if environment pollution is freely allowed. Economic growth involves urbanisation which leads to overcrowding, spreading of slums, pollution of water and air. All these reduce quality of life and social welfare is adversely affected. But GNP figures place no value in quality of life.
c) Production structure :GNP shows total of goods and services produced in country not the structure of production. The National income accountable treats equally the poor mans goods amd rich man's luxuries.
f) Essential consumer goods : The standard of living of majority of people on India depends upon availablity of essential commodities like wheat, rice,sugar.Greater the output of these commodities raises the standard of living but rise in production of luxuries mean same thing for inclusion in GNP.
e) Externalities : External benefits and external costs are real commodities and discommodoties produced in economy which are not included in GNP estimates. These external effects do not form a part of market transactions, no value is attached fo these and hence these are not included in GNP.
f) Non market transactions :These are those which are conducted outside the market system. The transactions of black market, unwritten donations for regional function etc. forms a sizeable part of total transactions of less developed countries. But these are not taken into consideration for national income accounting.
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