Define private income.

Private Income. 'Private income is the total of factor incomes and transfer incomes received from all sources by private sector within and outside the country'. Clearly it includes net factor income from abroad. Private sector consists of private enterprises and workers (factor owners). Thus private income consists of not only factor incomes earned within the domestic territory and abroad but also all current transfers from government and ROW. In this way it is the sum of earned incomes and transfer incomes received by private sector. Thus concept of private income is broader than that of personal income because private income consists of personal income + profit tax + undistributed profit (Refer chart in Q. 6.14). Again it should be kept in mind that conventionally 'net factor income from abroad' is allocated to private sector and not to government sector. Put in the form of equations :

Private Income = Income from domestic product accruing to private sector + Net factor income from abroad + All current Transfers.

= National Income - Income from domestic product accruing to Government Sector + Transfer incomes

= Personal income + Corporate tax + Undistributed profit.

Difference between Private income and Private sector income. Both are different. Private sector income includes only factor income earned within domestic territory by private sector whereas private income includes private sector income, NFIA and all current transfers from within and outside the country. Symbolically :

Private income = Private sector income + NFIA + All Transfer incomes

Three main forms of transfer income used in numericals are : (i) interest on national debt, (ii) current transfers from government administrative departments, and (iii) net current transfer from rest of the world.

The concept of private income is illustrated with the help of following numericals :