WHAT IS GROSS NATIONAL PRODUCT (GNP)

Gross National Product (GNP) is the total value of all finished goods and services produced by a country’s citizens in a given financial year, irrespective of their location. GNP also measures the output generated by a country’s businesses located domestically or abroad. It can be defined as a piece of economic statistic that comprises Gross Domestic Product (GDP), and income earned by the residents from investments made overseas.

 

Simply put, GNP is a superset of the GDP. While GDP confines its analysis of the economy to the geographical borders of the country, GNP extends it to also take account of the net overseas economic activities performed by its residents.

 

Basically, GNP signifies how a country’s people contribute to its economy. It considers citizenship, regardless of the location of the ownership. GNP does not include foreign residents’ income earned within the country. GNP also does not count any income earned in India by foreign residents or businesses, and excludes products manufactured in the country by foreign companies.

 

In calculation, GNP adds government expenditure, personal consumption expenditure, private domestic investments, net exports, and income earned by nationals overseas, and eliminates the income of foreign residents within the domestic economy. Moreover, GNP omits the value of intermediary goods to avoid double counting, as these entries get included in the value of final products and services.

 

What is the difference between GDP and GNP?

 

The basic distinction between GDP and GNP is the difference in estimating the production output by foreigners in a country and by nationals outside of a country.

 

How is GNP calculated?

 

The formula for GNP = GDP + Net factor income from abroad

 

or

 

GNP = C + I + G + X + Z

 

Where C is Consumption, I is investment, G is government, X is net exports, and Z is net income earned by domestic residents from overseas investments minus net income earned by foreign residents from domestic investments.