GNP
Gross National Product (GNP) is the GDP of a country added with its ‘income from abroad’. Here,
the trans-boundary economic activities of an economy is also taken into account. The items which are
counted in the segment ‘Income from Abroad’ are:
(i) Trade Balance: the net outcome at the year end of the total exports and imports of a country
may be positive or negative accordingly added with the GDP (in India’s case it has always
been negative except the three consecutive years 2000-03 when it was positive, due to high
levels of ‘services sector’ export during the years courtsey the booming BPO industry).
(ii) Interest of External Loans: the net outcome on the front of the interest payments i.e. balance
of the inflow (on the money lend out by the economy) and the outflow (on the money borrowed
by the economy) of the external interests. In India’s case it has been always negative as the
economy has been a ‘net borrower’ from the world economies.
(iii) Private Remittances: the net outcome of the money which inflows and outflows on account of
the ‘private transfers’ by the Indian nationals working outside India (to India) and the foreign
nationals working in India (to their home countries). On this front India has been always a
gainer- till early 1990s from the Gulf region (which fell down afterwards in the wake of the
heavy country-bound movements of the Indians working there due to the Gulf War) and
afterwards from the USA and the European nations. Basically, during the year 2012, India is
projected (as per the IMF) to be the highest receiver of this fund to the tune of $58 billion (it
was the second highest in 2011 at $55 billion, China was the top gainer with $57 billion).
Ultimately, the balance of all the three components of the ‘Income from Abroad’ segment may turn out
to be positive or negative. In India’s case it has been always negative (due to heavy outflows on
account of trade deficits and interest payments of the foreign loans). It means, the ‘Income from
Abroad’ is subtracted from India’s GDP to calculate its GNP.
The normal formula is GNP = GDP + Income from Abroad. But it becomes GNP = GDP + (– Income
from Abroad) = GDP – Income from Abroad, in the case of India. This means that India’s GNP is
always lower than its GDP.
The different uses of the concept GNP are as given below:
(a) This is the ‘national income’ according to which the IMF ranks the nations of the world in
terms of the volumes – at the Purchasing Power Parity (at PPP). For detailed discussion on the
PPP readers may search for it alphabetically in the Chapter- 24. India is ranked as the 4th
largest economy of the world (after the USA, Japan and China)- while as per the nominal/
prevailing exchange rate of rupee India is the 13th largest economy.
(b) It is the more exhaustive concept of national income than the GDP as it indicates about the
‘quantitative’ as well as the ‘qualitative’ aspect of the economy, i.e., the ‘internal’ as well
as the ‘external’ strength of the economy.
(c) It enables us to learn several facts about the production behaviour and pattern of an economy,
such as, how much the outside world is dependent on its product and how much it depends on
the world for the same (numerically shown by the size and net flow of its ‘trade balance’);
what is the standard of its human resource in international parlance (shown by the size and the
net flow of its ‘private remittances’); what position it holds regarding financial support from
and to the world economies (shown by the net flow of ‘interests’ on external
lending/borrowing).
Gross National Product (GNP) is the GDP of a country added with its ‘income from abroad’. Here,
the trans-boundary economic activities of an economy is also taken into account. The items which are
counted in the segment ‘Income from Abroad’ are:
(i) Trade Balance: the net outcome at the year end of the total exports and imports of a country
may be positive or negative accordingly added with the GDP (in India’s case it has always
been negative except the three consecutive years 2000-03 when it was positive, due to high
levels of ‘services sector’ export during the years courtsey the booming BPO industry).
(ii) Interest of External Loans: the net outcome on the front of the interest payments i.e. balance
of the inflow (on the money lend out by the economy) and the outflow (on the money borrowed
by the economy) of the external interests. In India’s case it has been always negative as the
economy has been a ‘net borrower’ from the world economies.
(iii) Private Remittances: the net outcome of the money which inflows and outflows on account of
the ‘private transfers’ by the Indian nationals working outside India (to India) and the foreign
nationals working in India (to their home countries). On this front India has been always a
gainer- till early 1990s from the Gulf region (which fell down afterwards in the wake of the
heavy country-bound movements of the Indians working there due to the Gulf War) and
afterwards from the USA and the European nations. Basically, during the year 2012, India is
projected (as per the IMF) to be the highest receiver of this fund to the tune of $58 billion (it
was the second highest in 2011 at $55 billion, China was the top gainer with $57 billion).
Ultimately, the balance of all the three components of the ‘Income from Abroad’ segment may turn out
to be positive or negative. In India’s case it has been always negative (due to heavy outflows on
account of trade deficits and interest payments of the foreign loans). It means, the ‘Income from
Abroad’ is subtracted from India’s GDP to calculate its GNP.
The normal formula is GNP = GDP + Income from Abroad. But it becomes GNP = GDP + (– Income
from Abroad) = GDP – Income from Abroad, in the case of India. This means that India’s GNP is
always lower than its GDP.
The different uses of the concept GNP are as given below:
(a) This is the ‘national income’ according to which the IMF ranks the nations of the world in
terms of the volumes – at the Purchasing Power Parity (at PPP). For detailed discussion on the
PPP readers may search for it alphabetically in the Chapter- 24. India is ranked as the 4th
largest economy of the world (after the USA, Japan and China)- while as per the nominal/
prevailing exchange rate of rupee India is the 13th largest economy.
(b) It is the more exhaustive concept of national income than the GDP as it indicates about the
‘quantitative’ as well as the ‘qualitative’ aspect of the economy, i.e., the ‘internal’ as well
as the ‘external’ strength of the economy.
(c) It enables us to learn several facts about the production behaviour and pattern of an economy,
such as, how much the outside world is dependent on its product and how much it depends on
the world for the same (numerically shown by the size and net flow of its ‘trade balance’);
what is the standard of its human resource in international parlance (shown by the size and the
net flow of its ‘private remittances’); what position it holds regarding financial support from
and to the world economies (shown by the net flow of ‘interests’ on external
lending/borrowing).
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