Gross National Product (GNP) and Net National Product (NNP)
Gross National Product or GNP is arrived at by adding monetary value of Net Factor Income from abroad to Gross Domestic Product. GDP considers the monetary value of goods and services produced within the domestic territory by both residents and foreign nationals. However, citizens of the country working abroad also generate income.
GNP is a measure of the money value of all goods and services produced by the nationals of a country within the country and outside the country during a year. Net factor income earned from abroad is the income earned by Indian citizens abroad minus income earned by non-residents in India. GNP is obtained by adding Net Factor Income earned from Abroad to GDP.
Net Factor Income from Abroad (NFIA) = Income received by residents abroad – Income to non-residents working in the domestic territory
Thus, GNP of a country includes the contribution made by non-residents by way of wages, rent, interest and profits. Income from Indian residents going abroad to work, Indian banks functioning abroad, Indians owned property abroad etc are the factor income earned from abroad by the residents of India, by rendering factors service to the cost involved in their production (factor cost). In GNP, we consider the products produced by the citizens irrespective of the boundary of the country.
Gross National Product (GNP) = GDP + Net Factor Income from Abroad (NFIA).
If GNP > GDP, Net Factor Income from Abroad (NFIA) is positive. Else, NFIA is negative.
Potential GNP, Actual GNP and GNP Gap
Potential GNP is the GNP that would have been produced during a year, had there been full utilization of economic resources of the country. Potential GNP is also called Capacity GNP or Full Employment GNP.
Actual GNP is the market value of the final goods and services produced by the resources of an economy during a particular year.
GNP Gap
Normally Actual GNP of a country is less than Potential GNP and the difference between both is the GNP Gap.
GNP Gap= Potential GNP – Actual GNP
GNP Gap arises because of unemployment, idle capacity, low productivity of labour force, underutilization of resources etc. GNP Gap plays a vital role in policy decisions as all countries tries to bridge the gap. GNP gas is very low in developed nations compared to Under Developed Countries (UDC).
Net National Product (NNP)
Net National Product (NNP) can be derived by adding the Net Factor Income From Abroad to the Net Domestic Product (NDP) or by subtracting Deprecian Allowance from GNP.
NNP= NDP + NFIA
NNP = GNP- Depreciation Allowance
NNP at Factor Cost or National Income
NNP at Factor Cost is also known as National Income. It is monetary value of goods and services turned out during an accounting year counted without duplication.
NNP at Factor Cost = NNP at Market Price – Net Indirect Taxes
