Disposable Income

The sum total of factor incomes and non-factor incomes (transfer income) is called disposable income in one year. Disposable income, also known as disposable personal income (DPI), is the amount of money that households have available for spending and saving after income taxes have been accounted for. Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy.

*DPI=Personal Income−Personal Income Taxes

*Net Disposable Income = National Consumption Expenditure + National Savings

Gross Net Disposable Income (GNDI):

It is the sum of factor and non-factor incomes gross of consumption of fixed capital occurring to the residents of a country.

*GNDI = GNP_MP + Net current transfers from abroad.

Net National Disposable Income (NNDI):

It is the sum of factor and non-transfer incomes net of consumption of fixed capital occurring to the residents of a country.

*NNDI = NNP_MP + Net current transfers from abroad.

What is Private Income?

It refers to the income which occurs to the private sector from all the sources within and outside the country.

Income accruing to Private Sector: It refers to that part of domestic income which accrues only to the private sector.

Income accruing to Public sector: It refers to that part of domestic income which accrues only to the public sector/government companies. It has two components:

·         Income from property and entrepreneurship accruing to government administrative departments. For e.g.: Railways, Post and Telegraph.

·         Saving of non-departmental enterprise. For e.g.: Indian air lines, LIC.

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Fig.: Disposable Income of India

Difference between Current Transfers and Transfer income:

S.No.	Current Transfers	Capital Transfers
1	It is a transfer made out of current income of the payer and added to the current income of the recipient.	It is a transfer made out of wealth or capital of the payer and gets added to the wealth or capital of the recipient.
2	It is included in disposable income of the country.	It is not included in the disposable income of the country.
3	For e.g.: Tax, donation, Old age pensions, Gifts, etc.	For e.g.: Capital grants, Lump sum payments made to houses due to natural calamity, etc.

Difference between Factor income and Transfer Income:

Basis	Factor Income	Transfer Income
Concept	It is an earning concept.	It is a receipt concept.
Meaning	It refers to income received by factors of production for rendering services in the production process.	It refers to income received without rendering any productive service in return.
Nature	It is included in both domestic income and national income.	It is neither included in domestic income nor national income.
Recipient	It is received by factor of production (land, labour, capital and enterprise).	It is generally received by the households and government without any flow of goods and services
Example	Rent, wages, interest and profits.	Scholarship, old age pensions and unemployment allowances.

• Personal Income: It is the sum total of all the income that are actually received by households from the sources. It doesn’t include corporate tax and retained earnings.
• Personal Disposable Income (PDY): It refers to that part of personal disposable income which is actually available at the disposable income of households. It excludes personal taxes and miscellaneous receipts of government.

       *PDY = Personal Consumption Expenditure + Personal Savings/Household Savings.

  

Difference between Gross Domestic Product at Market Price (GDP_MP) and National Income (NNP_FC): 

Basis	(GDPMP)	(NNPFC)
Nature of Concept	It is a territorial concept as it includes final goods and services produced within domestic territory of a country.	It is a national concept as it includes the value of final goods and services produced in the entire world.
Category of Producers	It considers all the producers within the domestic territory of the country.	It considers the producers who are normal residents of the country.
NIT	It is at market price i.e. it includes net indirect taxes.	It is at factor cost i.e. it excludes net indirect taxes.
Depreciation	It includes depreciation.	It doesn’t include depreciation.

Difference between Private Income and National income:

S.No.	Private Income	National income
1	It includes factor as well as transfer incomes.	It only includes factor income.
2	It doesn’t include the income of public sector.	It includes the incomes of public sector.

Difference between Personal Income and Private Income:

Basis	Personal Income	Private Income
Meaning	It refers to income actually received by households from all sources.	It refers to the incomes which accrue to private sector from all sources.
Concept	It is a narrower concept as it is a part of private income.	It is a broader concept as it includes the personal income.
Formula	PI = Private Income – Corporate Tax – Retained Earnings.	PI = Personal Income + Corporate Tax + Retained Earning

Difference between Personal Income and National Income:

Basis	Personal Income	National Income
Meaning	It is the sum total of all incomes that are actually received by the households from all the sources.	It refers to sum total of all the factor income, earned by the normal residents of a country during a period of one year.
Nature of Income	It includes both factor and transfer incomes	It includes factor incomes.
Public Sector Income	It doesn’t include the income earned by public sector.	It includes the income earned by public.