Net National Product at FC (National Income) : It is the sum total of factor
incomes (compensation of employees + rent + interest + profit) earned by
normal residents of a country in an accounting year
or
NNP_FC = NDP_FC + Factor income earned by normal residents from abroad –
factor payments made to abroad.

Every year the amount of depreciation is transferred to depreciation reserve fund. The main rationale behind maintaining this reserve that at the time of replacing an exiting asset, the company must have sufficient funds to purchase new assets. One of the example of Depreciation Reserve is Machinery Replacement Reserve particularly maintain for acquiring a new machine (when an old machine wears out completely).

Since 1991, Govt. of India has introduced diverse economic reforms to pull the country out of economic crisis and to accelerate the rate of growth. These reforms hinge upon:

1. The policy of liberalisation in place of licensing for the industries an trade.

2. The policy of privatisation in place of quotas for the industrialists.

3. The policy of globalisation in place of permits for exports and imports. These reforms are often described as the New economic policy or the policy of Liberalisation, Privatisation and  Globalisation (LPG) which aims at rendering the economy more efficient, competitive and developed.

ELEMENTS OF NEW ECONOMIC POLICY 

Liberalisation: It means to free the economy from the direct and physical control imposed by the government. 

Measures adopted for Liberalisation:

1. Abolition of industrial licensing.
2. De reservation of production areas 
3. Expansion of production capacity
4. Freedom to import capital goods 
5. Free determination of interest rates.

Privatisation: It refers to the process of involving the private sector in the ownership of management of state owned enterprises. It implies partial or full ownership and management of public sector enterprises by the private sector.

Measures adopted for Privatisation:

1. Contraction of public sector 
2. Disinvestment of public sector undertakings
3. Selling of shares of public enterprises 

Globalisation: It means integrating the economy of a country with the economies of other countries under condition of free flow trade and capital and movement of persons across borders. 

Measures adopted for Globalisation: 

1. Increase in equity limit of foreign investment
2. Partial convertibility of Indian rupees
3. Long-term trade policy
4. Reduction in tariffs.

Rapid industrialisation of a developing country like India depends upon the presence and creation of more basic infrastructure such as power, transportation, communication, irrigation, education, technical training etc. Most of the public sector enterprises were set up in these industries. The growth of the public sector in the field of iron and steel, petroleum and natural gas, coal, heavy engineering, heavy electrical machinery etc. has created a strong industrial base. Some public enterprises like STC and MMTC have contributed to export products from India substantially.
To reduce regional disparities in industrial development, public sector industries have been set up in undeveloped and underdeveloped regions of the country. All these activities contribute to the economic development of India.

An economic problem generally means the problem of making choices which occurs because of the scarcity of resources. The economic problem arises because people have unlimited desires but the means to satisfy that desire is limited. Therefore, satisfying all human needs are difficult with limited means.

Causes of Economic Problem

• Scarcity of Resources- Resources like labor, land, and capital, etc. are insufficient as compared to the demand. Therefore, the economy cannot provide everything that people want.
• Unlimited Human Wants- Human beings demands and wants are unlimited and never ends, which means they will never be satisfied. If a person one wants is satisfied, they will start tempting some new desires. People wants are unlimited and keep multiplying, therefore, cannot be satisfied because of limited resources.
• Alternative Uses- Resources being scared they are put into different uses. So, to make a choice among resources are essential. For instance, petrol is not only used in a vehicle but it is also used for generator, running machine, etc. So, now the economy should make a choice within the alternative uses.

The Indian government regulates Education and Health sectors through the following organizations:
(i) NCERT (National Council of Education
Research and Training) : The organization is responsible for designing the textbook upto 12th standard.
(ii) UGC (University Grants Commission): This organization is the prime funding authority for university education. It also enforces rules and regulations regarding higher education.
(iii) AICTE (All India Council for Technical Education): It enforces rules and regulations regarding technical engineering-education in the country.
(iv) ICMR (Indian Council for Medical Research):
This organization formulates the rules and regulations relating to education and research in health sector.

Human capital formation in India
(i) The seventh five year plan stressed upon the importance of human capital.
(ii) In India, ministry of education at the Centre and state level, NCERT (National Council of Educational Research and Training), UGC (University Grant commission), AICTE (All India Council of Technical Education) regulate the education sector.
(iii) In India, Ministry of Health at the Union and the State level and ICMR (Indian Council of Medical Research) regulate the health sector.
(iv) World Bank states that India will become the knowledge economy.
Also if India uses its knowledge as much as Ireland does, than the per capita income will rise by $ 3000 by the year 2020.

Domestic Income of a country can be more than its National Income- it is a true statement. This situation occurs when net factor income from abroad is negative. Hence, NDP(at factor cost) or Domestic income becomes greater than the NNP(at factor cost) or National Income.

Increase in National Income is Rs. 200 crores and MPC = 0.75

Multiplier(k) => 200 / change in investment

= 1/ (1- MPC)

=> 200 / change in investment = 1/0.25

=> 200 / change in investment = 4

=> change in investment = 200 / 4 = 50 crores.

Infant mortality rate is defined as the death of infants below one year of age per 1000 live births.

Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living. Poverty means that the income level from employment is so low that basic human needs can't be met. A common method used to measure poverty is based on income or consumption levels. A person is considered poor if his or her income or consumption level falls below a given minimum level necessary to fulfill consumption needs.

Following are the limitations of using GDP as an index of welfare of a country:
(i) With every increase in the level of GDP, distribution of GDP is getting more unequal, welfare level of the society may not rise.
(ii) Composition of GDP may not be welfare oriented even when the level of GDP tends to rise. i.e. rise in GDP may be concentrated in few hands.
(iii) Because of non-monetary transactions, GDP remains under estimated and therefore, there is no proper index of welfare.
(iv) Impact of externalities (positive or negative impact of an activity) is not accounted in the index of social welfare in terms of GDP.