Output Method Or Product Method:

1. According to the product or output method, National Income is estimated by adding up the value of all final goods and services produced in the country during one year. 

2. NI = C+I+G+(X-M)+(R – P) – Depreciation – Income Tax + Subsidies 

3. In India, this method is applied to agriculture, mining and manufacturing. 

4. Here we look at National Income from production side.

5. In this method we deduct indirect tax and then add subsidies to arrive at National Income at Factor Cost from Market Price.

Income Method Or Factor Cost:

1. According to Income method the National Income is estimated by adding the factor Incomes that accrue to factors of production by way of rent, wages, interest and profit.

2. NI = R + W + I + P + MI + (X-M) + (RP) – Depreciation – Transfer Income. 

3. In India this method is used by National Income Committee in trade, transport, professionals, liberal arts, public administration. 

4. Here we look at National Income from distribution side. 

5. This method is a direct method as we arrive at National Income at factor cost.