National Income is the sum of all the goods and services produced in a country, in a particular period of time. Normally this period consists of one year duration, as a year is neither too short nor long a period. Concept of National Income:-
1. Gross National Product (GNP):-
GNP at market price is sum total of all the goods and services produced in a country during a year and net income from abroad.
Net Factor Income from AbroadGNP at Market PriceGross Domestic Product at Market Price
To calculate the GNP these points must be considered:* Consumer goods and services.* Gross private domestic income.* Goods and services produced by Government.* Net income from abroad.
2. Gross Domestic Product(GDP):-Is the market value of all recognized goods and services produced within a company in a particular given period of time. GDP at Market Price is estimated by deducting the value of intermediate consumption from the value of output produced by all the producer within the domestic territory of a country.GDP of the country is measured by the World Bank.
Components of GDP:-In GDP we find different components of income namely(1) Wages and salaries
(2) Rent(3) Interest(4) Dividends(5) Undistributed Profit(6) Mixed income(7) Direct taxes.
3. Net National Product (NNP):-
Is the total market value of all goods and services produced by a country in a given period of time. Net National Product is the difference of Gross National Product and depreciation.
4. Personal Income:-The income actually received by persons from all sources in the form of current transfer payments and factor income. Total income received by the citizens of a country from all sources before direct taxes in a year.
Personal Income = Private Income + Undistributed Corporate Profits – Direct Taxes
5. Disposable Income:-The income remaining with individuals after deduction of all taxes levied against their income and their property by the government. Disposable Income refers to the income actually received by the households from all sources. The individual can dispose this income according to his wish, as it is derived after deducting direct taxes.
DI = Personal Income – Direct Taxes – Miscellaneous Receipt of the Government
Approaches to Calculate national Income
1. Income Approach: – sum total of incomes of individuals living in a country during 1 year. Another way of measuring GDP is to measure total income. Approach measures GDP by adding incomes that firms pay households for factors of production they hire- wages for labor, interest for capital, rent for land and profits for entrepreneurship. These are divided into five categories:
1. Wages, salaries, and supplementary labor income2. Corporate profits3. Interest and miscellaneous investment income4. Farmers’ income5. Income from non-farm unincorporated businessesThese five income components sum to net domestic income at factor cost. The formula to calculate the GDP is
WhereR: rentsI: interestsP: profitsSA: statistical adjustments (corporate income taxes, dividends, undistributed corporate profits) W: wages.2. Production Approach: – Market value of all final goods and services calculated during 1 year. The production approach is also called as Net Product or Value added method. This method consists of three stages: * Estimating the Gross Value of domestic Output in various economic activities; * Determining the intermediate consumption, i.e., the cost of material, supplies and services used to produce final goods or services; and finally * Deducting intermediate consumption from Gross Value to obtain the Net Value of Domestic Output.
Net Value Added = Gross Value of output – Value of Intermediate Consumption. Value of Output = Value of the total sales of goods and services + Value of changes in the inventories. The sum of Net Value Added in various economic activities is known as GDP at factor cost. GDP at factor cost plus indirect taxes less subsidies on products is GDP at Producer Price. 3. Expenditure approach:- The expenditure approach is that all of the product must be bought by somebody, therefore the value of the total product must be equal to people’s total expenditures in buying things. Components of GDP by Expenditure:
GDP is the sum of Consumption, Investment, Government Spending, and Net Export. GDP = C + I + G + (X – M)* C (consumption): is normally the largest GDP component in the economy, consisting of private (household final consumption expenditure) in the economy. Examples include food, rent, jewelry, gasoline, and medical expenses but do not include the purchase of new housing.
* I (investment): include, for instance, business investment in equipment, but do not include exchanges of existing assets. * G (government spending): is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits. * X (exports): represents gross exports. GDP captures the amount a country produces, including goods and services produced for other nations’ consumption, therefore exports are added.
* M (imports): represents gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic.
GDP of United Arab EmiratesAccording to a report published by the World Bank -The Gross Domestic Product in the United Arab Emirates was worth 360.25 billion US dollars in 2011 and comes on 28th position in the world. It is roughly equivalent to 0.58 percent of the world economy. Historically, from 1973 until 2011, the United Arab Emirates GDP averaged 72.9 USD Billion reaching an all time high of 360.3 USD Billion in December of 2011 and a record low of 2.9 USD Billion in December of 1973. The gross domestic product is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time.
GDP chart of United Arab Emirates:-
GDP Growth Rate
There was a big inflation before 2002 in the GDP of UAE as the price of oil fell down. The economy grew by a further 12% in nominal terms as oil prices rose once again in 2003, GDP grew to AED 323bn in 2004 an increase of 13% and still GDP is rising up. In 2009 the GDP growth rate was 1.3% With the non- oil sector contributing to 71.6% of the GDP
GDP Per Capita
The GDP per capita is obtained by dividing the country’s gross domestic product, adjusted by inflation, by the total population The Gross Domestic Product per capita in the United Arab Emirates was last recorded at 21058.44 US dollars in 2011 and is equivalent to 170 percent of the world’s average. The highest Per Capita of UAE was 49329.2 USD in December 1973 and lowest is 20766.3 USD in December 1986.
LABOUR1. Population:The total population in United Arab Emirates was last recorded at 4.6 million people in 2011 from 0.1 million in 1960, changing 4978 percent during the last 50 years. The population of the United Arab Emirates represents 0.07 percent of the world´s total population.
2. Unemployment rate :The unemployment rate measures the number of people actively looking for a job as a percentage of the labor force. In UAE it increased to 4.60 percent in 2011 from 4.30 percent in 2010. About 90% of UAE nationals only want government jobs, which is not a healthy. In private sector they do not get satisfied salary. Over the last five years Inflation appears to have picked up as the surge in domestic demand has generated price pressures, particularly in the real estate and some parts of the service sectors. This has begun to drive up wage demands in the private sector
TRADE1. Balance of Trade:
The United Arab Emirates recorded a trade surplus of 291951 Million AED in 2011. Historically, from 2000 until 2011, the United Arab Emirates Balance of Trade averaged 144190.6 Million AED reaching an all time high of 291951.0 Million AED in December of 2011 and a record low of 42160.0 Million AED in December of 2001. Although The United Arab Emirates is becoming less dependent on natural resources as a source of revenue, petroleum and natural gas exports still play an important role in the economy. The country imports mostly machinery and transport equipment, chemicals and food.
2. Import and Export:The UAE’s main export commodities are crude oil, natural gas, re-exports, dried fish and dates. Its main import commodities are machinery and transport equipment, chemicals and food. The country’s top 5 import partners are India 17.50%, China 14%, USA 7.70%, Germany 5.60%, and Japan 4.82%. And the export partners are Japan 17.10%, India 13.60%, Iran 6.90%, South Korea 6.10% and Thailand 5.10%.
PRICEConsumer Price Index:The Consumer Price Index or CPI measures changes in the prices paid by consumers for a basket of goods and services. From 2008 until 2012, the United Arab Emirates Consumer Price Index (CPI) averaged 114.79 Index Points reaching an all time high of 117.39 Index Points in September of 2012 and a record low of 107.75 Index Points in January of 2008. There is y-o-y rise in the price of eatable goods as the consumption is increasing in last months
CONSUMERConsumer Spending:-Consumer spending in the United Arab Emirates increased to 425183 AED Million in June of 2008 from 350347 AED Million in June of 2007. Consumer spending in the United Arab Emirates is reported by the Ministry of Economy, UAE.
Historically, from 1998 until 2008, the United Arab Emirates Consumer Spending averaged 240080.23 AED Million reaching an all time high of 425183 AED Million in June of 2008 and a record low of 93027 AED Million in June of 1998
GOVERNMENTGovernment Spending:-Government Spending in the United Arab Emirates increased to 86570 AED Million in June of 2008 from 76190 AED Million in June of 2007. From 1998 until 2008, the United Arab Emirates Government Spending averaged 55527.31 AED Million reaching an all time high of 86570 AED Million in June of 2008 and a record low of 33440 AED Million in June of 1998
Government Budget:-The United Arab Emirates recorded a Government Budget surplus equal to 2.90 percent of the country’s Gross Domestic Product in 2011. From 2000 until 2011, the United Arab Emirates Government Budget averaged 1.4 Percent of GDP reaching an all time high of 21.1 Percent of GDP in December of 2008 and a record low of -13.0 Percent of GDP in December of 2002. Government Budget is an itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when a government spends more money than it takes in. The opposite of a budget deficit is a budget surplus.
ANALYSISUnited Arab Emirates is growing year by year and comes on 28th in world ranking. Its National Income is 360.245 billion of USD. * Consumption: The CPI was increasing by which the consumption was less. In recession period 2008 The Index was fallen down to 108 which impact increasing the consumption of good and helps in raising the national income. And also the Banking sector provides the loan at low rate of interest which helps to grow the GDP * Government spending :