Meaning of NDI. NDI is defined as net national product at market prices (NNPMP) plus net current transfers from rest of the world.
Symbolically: National disposable income = National income + Net indirect taxes + Net current transfers from rest of the world. Current transfers are gifts in cash and kind (like consumer goods and even military equipment).
Simply put, Net Disposable Income is the income which is at the disposal of the nation as a whole for spending or disposal. Main idea behind NDI is to know what is the maximum amount of goods and services the domestic economy has at its disposal. Net indirect taxes are included as it is transfer earnings of the government which it is free to use the way it likes. Similarly net current transfer from ROW is also included since it impacts purchasing power of the country. But current transfers within the domestic territory cancel each other, and therefore, not included as they do not impact NDI. Thus national disposable income is the maximum available income (earned and transfer incomes) from all sources that a nation can spend on consumption and saving without disposing off its assets to finance its expenditure. National Disposable Income for a country is in the same way as Personal Disposable Income (Personal Income - Personal taxes) is for an individual. It is in fact, net national disposable income. Symbolically:
National disposable income = NNP at MP + Net current transfers from rest of the world
= National income + Net indirect taxes + Net current transfers from rest of the world.
National Disposable Income (NDI) can be gross and net.
