Importance of Saving बचत का महत्व

Importance of Saving

ü  Saving is a precaution for future requirement or need like any accident, illness or any other emergency.

ü  To increase their living-standard

ü  Farsightedness for future

ü  Increase their future income by investment

ü  Saving for family members

ü  To become a Enterprises

ü  To stand independently in the society

ü  To increase their social status

 

Importance of Saving  

There are lots of things which give us a power or boost us to save like –

ü  If we have a high level of National Income, it shows a positive sign for more saving due to high level of personal income.

ü  Internal or external trades also show a positive for personal income & saving prospectus.

ü  If any countries have a high level of Natural Resources then it’s able to increase the national income or then its increase the saving.

ü  Our industrial growth or development also represents the level of income & saving. If there is a high level of industrial growth or development then there is a high level of national income or personal income.

ü  If any countries have a high level of trained or good quality labor then they are able to receive the high level of income & high possibility to save.

ü  If any countries have a high level of Agricultural production & development then there is a possibility for high level of income and saving.

A facilities and secure environment always lead to save, if any country have these types of environment then the people of that country have more motivated for saving –

ü  If there is a high level of banking facilities and safety of assets is available then there is a high level of saving.

ü  Good Tax policy is always motivated for saving.

ü  If countries have peace & secure environment then these things always motivate for more saving.

ü  If any countries have a high level of opportunity for investment then than these things increase the jobs level, these things lead to a high level of income & saving.

                                                          

Save Saving बचत बचत करना बचत का महत्व

Save or Saving

Saving is a word which is related with income and investment point. Saving is the total amount which left from our salary after consumption. Every one aware about the function of saving and its important. We save a part of our salary for our future requirement & uncertainty. Saving is totally related with our income level and with high income we are able to save more amounts. We also represent saving like S = Y – C. S for saving or Y for income or C for consumption.

Save  - बचत  

If we have zero income, in that situation, we also buy and carry our basic needs. But after some time when we have income then we start increasing our consumption and buy more things. In these situations, we have no saving. But after some time, when we have continued increasing our income, then we are able to save some amount after consumption. These savings helpful for future requirements and uncertainty. Saving also related with our investment point, if we have more saving then we are able to invest more amount in infra, capital goods or other things which is important for our future.

But saving and consumption have a relationship like if we start save more & more amount then we a lot of extra production and our future investment become unprofitable and people starts to come out from production and its start a shut-down then we have a lack of jobs and this situation decrease our income or increase in unemployment. So, income or consumption or saving have a close relationship with each other and it’s become a economic cycle. 

foreign market foreign relation foreign trade foreign

Open market foreign market foreign relation foreign trade foreign

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income. This is a close market because all the thing or business happens in a country between different – 2 sector like House-hold, Business sector, Government, Capital market or Bank etc. In current time frame, all the market in the world is open for trade and our different - 2 sectors make a trade with out-side according to the requirement. 

Foreign Relationship – in current situation, all economic are open for trade and make a business with each other because no one market is complete in all aspects so that to complete our basic need, they go for the foreign trade or foreign business or international trade. For example –

 foreign market foreign relation foreign trade

ü  House-hold demand lot of thing & buy some things from foreign market,

ü  A business men also do business with foreign company & also support each other,

ü  Capital market also opens their branch in different country & also makes an easy trade. They also help in foreign payment & money transfer.

ü  Government also make a relationship with other country like food supply, technology improvement, R&D, space and any natural disaster or other types of help.

So, we can say that in current time frame, Every economic have the capability and capacity to produce the different things but no economic will be able to produce all the things so it’s become necessity to go for a international trade or foreign trade. 

Government participate in Circulation of Money Government involvement

Government participate in Circulation of Money

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income from different – 2 method like – income method or expenditure method and we know that our national income is always be equal to national expenditure

Government involvement –

In these types of economic, we divide the economic in four sectors like House-hold, Business, Capital Market (Saving or Investment) and Government:- 

Government participate in Circulation of Money

House-hold –

This side of the economic holds the entire production factor like land, capital or man power etc. House hold sales there services in production process and earn income in terms of rent on land, interest on capital and wages or salaries on manpower etc. Before any consumption, house-hold must pay Government Tax and Government Returns this amount in terms of social welfare like school, pension, hospital and police etc. Then start saving and we make a new involvement in flow of money like Bank (Capital Market). House-hold always prefers to save a part of his total income for future and rest is spending on consumption.

Business –

These sectors have the idea and produce the goods & services and sale these production to the house hold and earn money. On this income, business man must pay Government tax and Government buy many product from the market, also Government spend money on infra project to support the industry.

So, we can say that Government involvement in the Circulation Flow of Money or in the market is really important and it is the Government responsibility to implement the welfare scheme for society and make such policies which support the industry & its growth.

Saving Investment in Circulation of Money

Saving & Investment in Circulation of Money

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income from different – 2 method like – income method or expenditure method and we know that our national income is always be equal to national expenditure. 

Saving & Investment in Circulation of Money –

In these types of economic, we divide the economic in three sector like House-hold, Business and Capital Market (Saving or Investment) :-

Saving Investment in Circulation of Money

House-hold –

This side of the economic holds the entire production factor like land, capital or man power etc. House hold sales these production factors in production process and earn income in terms of rent on land, interest on capital and wages or salaries on manpower etc. Also, this sector start saving and we make a new involvement in flow of money like Bank (Capital Market). House-hold always prefers to save a part of his total income for future and rest is spending on consumption.

Business –

These sectors have the idea and produce the goods & services and sale these production to the house hold and earn money. We can say that the house-hold is the entire market for business sector. They buy the entire production factor from house hold and pay them (rent, interest, wages or salaries) for this. A business man also starts saving for future investment and also for R&D. A business man also uses capital market for saving & investment point.

Flow of Money Income & its Circular Flow Money flow circular flow of money

Income & its Circular Flow

It is a basic concept about income that money always is in a rotation from one person to another in the form of income & expenditure. There is lot of activity like saving, tax, government exp, investment and import or export, if we add these figure then we are able to find out our National Income from different – 2 method like – income method or expenditure method and we know that our national income is always be equal to national expenditure. 

                                                                                                     

Income flow between business & house hold sector –

We start it from a basic concept that our economic start from two sides – one is house hold and second is business.

Flow of Money

First side, house hold – This side of the economic hold all the production factor like land, capital or man power etc. house hold use these production factor in production process and get rent on land, interest on capital and wages or salaries on manpower etc. so these sector sale their services and earn income. This side has the consumption and buys all the goods & services which are produces.

Second side, business sector – These sectors have the idea and produce the goods & services and sale these production to the house hold and earn money. Or other way, we can say that the house-hold is the entire market for business sector. They buy the entire production factor from house hold and pay them (rent, interest, wages or salaries) for this. So, there is a continue flow of money from one another at every time.

Assumption –

ü  House-hold spent all his income on goods & services

ü  Total production is always be equal to total sale or consumption

ü  There is no saving by business sector

National Income and Economic Welfare Social Welfare

National Income and Economic Welfare

National Income has a close relationship with economic welfare and also has a positive co-relationship with each other. Economic welfare is relay have an important concept for every economic and also for social welfare. Economic welfare totally depends on the growth of National Income and its distribution. Economic welfare means prosperity level & living standard of an individual or a group of peoples in the society.

So we have two concepts about economic welfare –

ü  Change in the size of National Income

ü  Change in the distribution of National Income

National Income and Economic Welfare

Change in the size of National Income – the size of the national income has a positive relationship with economic welfare. If our national income increased then the people spend more money for goods & services. Its increase our economic welfare. If there is a negative or decrease in the size of national income then people decrease their expenditure on goods & services.

Economic welfare also depend on the real increase in our national income, it is not just due to a price high in current price index. If there is an increase in the income of rich people and no increase in the income of poor people then it is not a economic welfare.

Change in the distribution of National Income – distribution of our national income is also an important point. If there is a shift of money for rich people to poor people then we say that it is a concept which increases our economic welfare or equal distribution of National Income.

If there is shift of money from poor people to rich people or if we make such policy which supports the rich people then we can say that it is not a good one or positive for economic welfare. Policy like increase in working hour, give less than the minimum wages, lack in the facility in factory area or slum area etc, these things are against for the concept of economic welfare.

Also, if there is an increase in the national income then we assume that there is an increase in the personal income but if our population increase on the same rate, in this situation, there is no economic welfare. Also personal income does not have a positive relationship with economic welfare. 

Limitation or Difficulties of National Income Limitation Difficulties National Income

Limitation or Difficulties of National Income

There are lots of limitations while we measure the National Income. There are multiples way to calculate the national income and every theory has their own limitation. We face the problem due to their assumption and complex static.

Limitation or Difficulties of National Income 

Limitation of Product Method –

ü  Housewives Services – in national income, we not include the housewives services but we include the payment for servant.

ü  Middle or final goods – it is very difficult to calculate the difference between a intermediate or final goods. If we not able to clarify the difference, the possibility of doubling is increased.

ü  Illegal activities – these types of illegal activities are not to be calculated while we measuring the National Income.

ü  Consumer Services – there are lot of services which satisfied the human need like film, dance, teacher, doctor or barber but it is very difficult to calculate their income.

ü  Capital gains also not add in National income.

ü  Second hand materials (assets or goods) are also not calculated.

ü  Change in stock materials or inventory is included in NI but we not add the total materials change.

ü  Always to use a base year price index because current price change during the time so that it is not give a real picture.

Limitation of Expenditure Method –

ü  It is very difficult to calculate Government Services like police, military, admin or court etc. it is not very sure about these services that they are middle or final services.

ü  Use of durable consumer goods like car, TV, furniture etc

ü  There is lots of public expenditure like police, park, lighting, museum, water supply or river but it is very difficult to identify that these are investment or consumption. 

ü  Different types of payment or transfer like pension, unemployment or interest on loan etc.

Limitation of Income Method –

ü  Owned or rented house – a rent received always be a part of National Income but if a owner live in self occupied house how will be the calculation.

ü  Payment of wages or a part of salary in different kind like free food or house or cloths or other thing, but their calculation is very difficult.

ü  It is very difficult to calculate the income of a self employment person.

ü  There are lot of goods and services which a farmer or producer retain for self use, so calculation of these type of thing is very difficult.

Income different Income types of Income aay aay ke prkar

Income different Income types of Income aay

Private Income –

An income which is received by the private or personal people from different – 2 income sources or as a production factors. In this income, there is no involvement of government side or an income which is received from government services. So, we must add or subtracted some of item from GNP. Add these types of item like – pension, unemployment, health scheme, normal profit and abnormal profit or income from abroad etc. subtract item – income from government, other surplus, pension scheme or life insurance etc.

Private Income – NNP at factor cost or National Income + transfer payment + interest on public debt – profit of public sector – payment for social security.

Income

Personal Income –

A total income which is received by the public from different – 2 resources before paying any tax. There are lots of differences in national income or personal income. We must add lot of transfer or payment of amount in personal income.

Personal Income – national income + transfer payment + interest on public debt – tax on profit – payment for social security – undistributed profit of corporate.

Disposable Income –

An income which is left for expenditure or consumption after giving all tax. 

Disposable Income – personal income – direct tax.

Real Income –

When we calculate the national income on the base of any year like 1981 or 1991 or 2000-01 or 2011 etc. when we calculate the national income with this method, we are able to get a real picture of national income and growth. But when we calculate the income on current year price index then we add inflation & also these data not represent a real picture.  

National Income GNI NI Gross National Income राष्टीय आय rashtiy aay

National Income GNI NI Gross National Income राष्टीय आय rashtiy aay

National Income is a word which is very wide in economic environment and also knows as national profit or national expenditure or national out-put. National Income is the total income of any economic which is generated in a limited time frame or a financial year. In an economic, there are mostly three sectors like agri, service or manufacturing units. These sectors are inter-related with each other so one sector out-put is the in-put for other one. When we calculate the national income, we must be careful to calculate the inter-mediate things or final product of the economic.

National Income or Gross National Income 

There are three ways to calculate the National Income:–

Income Method - In this method, we add all the income which is received by the different working factor which available in the market because they receive the income against a work done by them.

Total Product or Out-put Method – In this method, we add all the out-put which is done by the economic in a limited time frame or a financial year. For example – building, machine, capital goods or non capital goods etc.

Value Added Method – this is the last method and have a unique importance in the calculation of national income because in this method, we only add all the value which is done by the different – 2  industry. So in this method, we separate the intermediate things or final product of economic. This method give a real data of national income of any country and most of the country us this method.

In this method, firstly we add the value added of industry and also add the net income which is received by the abroad or total excess of export over import or a net income from abroad. In this method, we also able to analysis the different – 2 sector and also compare form previous one out-put.     

Gross National Product GNP सकल राष्टीय उत्पाद

Gross National Product (GNP) सकल राष्टीय उत्पाद

GNP is the total market value of all the production (goods and services) which is produce in a limited time frame in the economic. GNP presents a large picture of an economic and it also includes the depreciation on capital equipment. We also include the net income or excess of export over import in it. We include different types of goods and services in it like – consumption goods & services, capital goods, goods & services produced by the government or net excess of export over import.

Gross National Product GNP सकल राष्टीय उत्पाद  

We use three methods to calculate the GNP –

Income Method (आय विधि) – we add all the wages or income paid to the production factor. GNP = wages or income + rent + interest + dividend + profit + mixed income + direct or indirect +depreciation + income from export over import.

Value added (उत्पाद विधि) – in this method, we add all the monetary value of final product which is produced by the economic in a limited time frame or a financial year. We only use the final product so we have a clear idea but intermediate product that is used by the industry. In this, we add all the final output and deduct all the input use by the industry.

Expenditure method ( व्यय विधि ) - in this method, we add all the expenditure for final goods and services in an economics. GNP = consumption + investment + government expenditure + net foreign investment 

Gross Domestic Product GDP सकल घरेलू उत्पाद

Gross Domestic Product (GDP) सकल घरेलू उत्पाद

  

GDP is the total of all goods and services which is produced by the economic in a limited time frame. We calculate the GDP on two basics- first is GDP with real data in which we assume a particular year as a base and use that year price index to calculate the GDP. In second method, we calculate the GDP with current year price index; we call it GDP with marker price. In other word, GDP at market price - it is the total market value of production (goods and services) which is produced by an economic in a financial year.

We calculate our GDP with three methods like –

·         Production Method - उत्पाद विधि 

·         Expenditure Method - व्यय विधि 

·         Income Method - आय विधि

Gross Domestic Product GDP सकल घरेलू उत्पाद

GDP at Factor Cost ( साधन लागत पर ) - 

There are lot of production factor in the market which produce different – 2 goods and services in a limited time frame or a financial year. Every factor receives an amount against the efforts or work which is done by him, so if we add all the wages paid to the factors, we are able to calculate the GDP at Factor Cost. In other words, we add all the net value which is added at different stage of production.

GDP at Factor Cost = Net value Added +depreciation.

Net Domestic Product (NDP) –

Our capital goods use in production for a long run, so every year these machine have depreciation and lost a part of value. Every machine has depreciation like machine, equipment or building etc. So, for Net Domestic Product we must deduct the depreciation for GDP.

NDP = GDP – depreciation.

GDP at Nominal Price – Calculation of our GDP at current year price index.

GDP at Real Price – Calculation of our GDP at a base year price index like 1981, 1991, 2000 or 2011 etc.