Gross National Product

Introduction

• Gross National Product (GNP) is the value of final goods and services produced by the residents of a country irrespective of the economic territory during a financial year. 

Calculation of GNP

• GNP is the GDP of a country added to its income earned from abroad. 

• While calculating GNP transboundary activities of an economy are also taken into account.

GNP = GDP + Income from abroad

• The components which are counted in the segment of income from abroad are private remittances, interest on external loans and external grants.
• In the case of India, the balance of all three components of the income from abroad is always negative. Therefore,

                                                GNP = GDP + (- Income from abroad)

                                                         = GDP – Income from abroad

• GNP is computed by adding all the components of GDP with the income earned by residents from overseas investments (known as factor income from abroad), minus income earned within the domestic economy by foreign residents (known as factor income to abroad). 

GNP = GDP + (Factor Income from Abroad – Factor income to abroad)

GNP = GDP + Net Factor Income from Abroad

GNP (at Market Price) = GDP (at Market Price) + Net Factor Income from Abroad

GNP (at Factor Cost) = GNP (at Market Price) – Net Indirect Taxes            

• Net indirect tax is the difference between indirect tax and subsidy. 

Current Method of Calculating GNP

• The Gross National Income (GNI) is the current way of expressing GNP.
• The World Bank defines GNI as: “GNI is the sum of value added by all resident producers plus any product taxes (minus subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad.
• Here, income and product cover the same general concept but are measured from different perspectives. Income measures all the income from productive activities (wages, rents, profits). Product is the value of all the production. So, the difference between the two is very intuitive here. Therefore, GNP is estimated on the ‘Basis of Product Flows’ and GNI is estimated on the basis of Income Flows.  
• The World Bank releases GNI data every year.