6 Factors Determines National Income Of A Country

The size of National Income is not same and uniform in all the countries. If differs from country to country. Several factors are responsible for this. The factors which determine the size of national income are mentioned as follows:

6 Factors Determines National Income :

1. Natural resources: The size of national income is high in those countries where natural resources are the main source of entire production of goods and services in a country. However the extent of utilization of natural resources depend on the level of technology and investment. When the people are uneducated, illiterate and ignorant, the natural resources remain underutilized, under utilized or misused. It is due to this reason that National income is very low in several developing countries.

2. Efficiency of labour : National income will be high when the labourers are efficient and meritorious in their work. Hard working and honest labourers in different sectors contribute their skills for the promotion of output. If labourers are physically weak and mentally unsound and if they have no devotion and sincerity in their work, output can’t be increased. Hence the size of National income and efficiency of labour are directly related to one another.

3. Capital stock : National income will be high when a country has more capital stock. National income is The sum of the goods and services produced with the help of the natural resources and capital stock. If the capital available in a country is low, then it is not possible to increase production in different sectors. Natural resources and factors of production remain idle or underutilized due to the low capital stock.

4. Entrepreneurial ability : Entrepreneurial ability is another important factor which determines the size of national income. National income will be high in those countries where the entrepreneurs take risk and bear uncertainty. The entrepreneurs who take initiative and interest in productive affairs will reap profits. Foresightedness, enterprising spirit, dynamism, professional commitment, co-ordination between different factors, team-spirit etc. are some other qualities of an entrepreneur. National income will be high when such entrepreneurs exist in a country.

5. Level of Technology : Besides the above factors, the size of national income is determined by the technological conditions and standards. If modern techniques and sophisticated implements are utilized in production and if the labourers are provided with training, national income remains at a higher level. For this, extensive facilities have to be made for the promotion of technological knowledge, education and training for the labourers.

6. Social and political conditions : The social and political conditions prevailing in a country also influence and determine the size of national income. If people assign priority to economic activities by utilizing leisure properly, they can produce more output. National income can be increased when people save considerable portion of their income. Similarly national income can also be increased when there exists political stability in a country. Besides the size of national income is also determined by the social and political institutions in a country. Thus, the size of national income is determined by several factors.