WHAT IS GROSS NATIONAL PRODUCT? HOW GNP AND NDP CALCULATED?
GROSS NATIONAL PRODUCT
Gross national product (GNP) refers to goods and services produced by Indians whether in India or abroad.
How Is GNP Calculated?
GNP = GDP -Production by foreigners in India + Production by Indians outside India
GNP = GDP — Factor income paid to foreigners in India + Factor income paid to Indians abroad
i.e., GNP = GDP — Net factor income from abroad
-GNP refers to the monetary value of all the finished goods and services produced by nationals (citizens) anywhere in the world in a specific time period.
Comparison with GDP
GDP is the monetary value of all the finished goods and services produced in a territory such as India, whereas GNP is the monetary value of all the finished goods and services produced by nationals such as Indians.
In India, the value of GDP is higher than that of GNP because India has received more investment from abroad compared to the investment made by Indians in abroad.
NET DOMESTIC PRODUCT (AT MARKET PRICE)
Whenever there is production of goods and services, there is consumption or reduction in value of assets used to produce goods and services; this consumption or reduction in value of assets is called depreciation.
How Do We Calculate NDP?
Whenever we calculate the net value from gross value, we subtract depreciation out of gross value.
Net Domestic Product (NDP) = GDP — Depreciation
NATIONAL INCOME OR NET NATIONAL PRODUCT AT FACTOR COST
Net national product at factor cost (NNPfc) or national income is the income earned by nationals (such as Indians) in a given time period.
In other words, it is the collective income of nationals in a given time period. It is calculated as follows:
NNPfc = GNPmp – Depreciation – Indirect taxes + Subsidies
NNPfc = GDPmp – Net factor income abroad – Depreciation – Indirect taxes + Subsidies
PER CAPITA INCOME
Per capita income or average income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area’s total income by its total population.
In other words, per capita income refers to national income divided by the population of a country.
Per capita income = National income/ Population
- India’s per capita income in 2015-16 at the current prices was ₹93,293 in 2015-16, compared to ₹86,879 in the preceding year.
- In real terms, the per capita income (at 2011-12 prices) during 2015-16 is estimated to have attained a level of ₹77,435, up 6.2% from ₹72,889 for 2014-15.
Real per capita income is obtained after adjusting nominal per capita income for inflation.
Real per capita income = Nominal per capita income / (1 + Inflation rate)
Let us understand the above concepts with actual figures given in the following table:
NDP at market prices = GDP at market prices – Depreciation
NNP at basic prices = NDP at market prices – Indirect taxes less subsidies – Net factor income abroad
Per capita income = Net national product at factor cost / Population