difficulties in measuring Kenya's national income

i.    Lack or inadequate information
Under all methods of measuring national income, there is a problem and difficulty in finding all the necessary information. For example in Kenya, people may not be officially employed and some businesses are operated at personal and unregulated system hence the authorities might not be able to compile this information in their data collection.
ii.    Errors and omissions
It’s difficult to collect and calculate the exact figures. This is because people may hide what they earn and firms may hide their output so as to avoid paying taxes in what is known as the black economy. For example in Kenya, a firm might hide some of its output so as to evade taxes.
iii.    Problem of double counting
Only final goods and services should be included in the national income accounting. But it’s difficult to distinguish between final goods and services and intermediate goods and services.
Intermediate goods and services are used for final consumption. For example, in Kenya maize can be consumed and it can also be processed to maize flour or to extract oil hence a possibility of double counting arises.
iv.    Underground Economy
It consists of illegal and unclear transactions where the goods and services are themselves illegal. for example in Kenya, drugs trade, prostitution and smuggling take place on daily bases and their incomes are not included in the national income hence it becomes difficult to determine the actual national income.
v.    Transfer Payments
Individuals get pension, unemployment benefit, and interest on public loans but these payments create difficult in the measurement of national income. The earnings are a part of individual’s income and also part of government expenditure. In Kenya, retirees have a pension scheme where they catered for.
vi.    Petty production
These are large numbers of petty producers and it’s difficult to include their production to the national income because they don’t maintain any account. The Jua-Kali sector provide jobs and earnings for thousands of Kenyans most of who are illiterates and with no accounts.
vii.    Calculation of Depreciation
It’s difficult to calculate depreciation since depreciation is an estimate and there are no standard concepts or rule for depreciation that can be applied. Since depreciation is estimation, no correct deductions can be made until and unless these accurate depreciation estimates are not deducted from the estimate of net national product, the net national income is bound to wrong.
viii.    Changes in Money Value
This leads links to different figures for national income even if the real output may have changed. Example is the problem of inflation in Kenya today. Due to price rise, the value of national income for particular year appears to increase even when the production decreases.
ix.    Non measurement of Output that are not traded in the product market
The values of labor in making homemade items of consumption are not counted in GDP; however when same items are made and traded in the product is included. Therefore the GDP obtained is below the real GDP of the economy.