Personal, National, and Gross National Disposable Income

Personal, National, and Gross National Disposable Income are three different types of income calculated by economists to measure the savings and spending rates of households and the whole country. Personal Disposable Income is part of personal income that is available at the disposal of a household. National Disposable Income is the income that is readily available for disposal to the entire nation. Gross National Disposable Income calculates income available for final consumption and gross saving to the nation.

1. Personal Disposable Income

Personal Disposable Income (PDY) is the term used to describe the part of personal income that is actually available at the disposal of a household. It is part of personal income that households keep after paying all taxes, fees, and other miscellaneous government receipts.

Personal Disposable Income (PDY) excludes Personal Taxes and Miscellaneous Government Receipts

Personal Income describes the total income received by households from all sources. PDY, on the other hand, is that part of personal income that each household is free to spend as they like,  this means that it shows the purchasing power of the households. Therefore, the portion of a person’s income that is paid to the government is not included in PDY.

• Personal Taxes are not included in PDY because households must pay direct taxes like income tax, house tax, etc. to the government.
• The Miscellaneous Receipts of Government that households have to pay to the government in the form of fees, fines, etc. are also not included in the PDY.

Personal Disposable Income = Personal Income – Personal taxes – Miscellaneous Receipts of Government

Another Method to calculate Personal Disposable Income (PDY) 

Households can spend their personal disposable income on consumption of goods and services or save for the future. Thus, PDY can also be calculated as follows:

Personal Disposable Income = Personal Consumption Expenditure + Personal Savings

2. National Disposable Income

National Disposable Income (NDY) refers to income that is readily available for disposal to the entire nation. It consists of both factor and transfer income. It is also referred to as Net National Disposable Income.

National Disposable Income comprises of Net Indirect Taxes and Net Current Transfers from the Rest of the World

NDY indicates the total income that is available from all economic sources. It means:

• NDY includes Net Indirect Taxes because it is the government’s transfer income and the government is free to utilise it whenever it considers right.
• NDY also includes Net Current Transfers from the rest of the world, which is the government’s transfer income from abroad.

National Disposable Income = National Income + Net Indirect Taxes + Net Current Transfers from the Rest of the World

Another Method to Calculate National Disposable Income 

The NDY is the maximum income available that can be saved and spent by a nation on the consumption of goods and services. The formula for NDY is thus:

 National Disposable Income = National Consumption Expenditure¹ + National Savings

¹ National Consumption Expenditure is the sum of Private Final Consumption Expenditure and Government Final Consumption Expenditure.

3. Gross National Disposable Income

Gross National Disposable Income can be calculated by adding depreciation to Net National Disposable Income.

Gross National Disposable Income = Net National Disposable Income + Depreciation

Difference between National Disposable Income and National Income

Basis	National Disposable Income	National Income
Meaning	National Disposable Income (NDY) refers to income that is readily available for disposal to the entire nation.	National Income is the aggregate value of all goods and services produced by firms in a given financial year.
Factor/ Transfer Income	National Disposable Income includes both factor and transfer incomes.	National Income only includes factor incomes.
Net Indirect Taxes	It is calculated at market prices and includes net indirect taxes.	It is calculated at factor cost, which means net indirect taxes are not included in national income.

Difference between National Disposable Income and Personal Disposable Income

Basis	National Disposable Income	Personal Disposable Income
Meaning	National Disposable Income (NDY) refers to income that is readily available for disposal to the entire nation.	Personal Disposable Income (PDY) is the term used to describe the part of personal income that is actually available at the disposal of a household.
Concept	It is a broader term because it covers both public and private sector income.	It is a narrow concept because it only considers household income.
Net Indirect Taxes	It includes all net indirect taxes.	It does not include any net indirect taxes.