National Income : GDP, NDP, GNP, NNP

What is National Income : GDP, NDP, GNP, NNP

We hear terms like GDP, NDP, GNP, NNP etc. very frequently in news, magazines and daily discussions. But do we know what they really mean and what are their uses. Here we are trying to make you understand these terms. These are some of the terms related to National Income which are being asked in competition now and then.

1. GDP (Gross Domestic Product)

The value of final goods and services produced inside the boundary of nation during one year.

GDP= Value of gross domestic output- value of intermediate consumption

Different uses of GDP are :

1. Per annum percentage change in the growth rate of an economy.
2. It is a quantitative aspect and its size gives the estimate about the internal strength of economy. But it DOES NOT say about the qualitative aspect of the produced goods.
3. GDP is used by the IMF or the WORLD BANK to do comparative analysis of its members.

2.NDP (Net Domestic Product)

It is the net form of GDP.
NDP= GDP – Depreciation
Depreciation is a decrease in an asset’s value caused by unfavourable market conditions.

Uses of NDP

1. Government announces the rate of depreciation in the economy. In domestic use, NDP is is used to understand the loss due to depreciation.
2. NDP is not used for the comparative economies since the rate of depreciation is different for different countries.

In India NDP is announced by the Ministry of Commerce and Industry.

3. GNP (Gross National Product)

It is the GDP of a country added with its income from abroad.

GNP= GDP + Income from Abroad
Or,
GNP = GDP – Income from abroad

Income from abroad= trade balance + interest on External Loans+ Private Remittance

Private remittance= inflows and outflows on account of private transfer e.g. NRI

Trade balance = net outcome at the year end of the total import and export.

Interest on external loans= balance of the inflow of interest payment (on money lend out of economy) – outflow of interest payment (on the money borrowed by the economy)

In case of India, GNP is negative. This is because of heavy outflows on account of Trade Deficit and interest payment on foreign loans.

Use of GNP:

GNP is the “national income” according to which IMF ranks nations based on PPP or Purchasing Power Parity. [India ranked 4^th after USA, Japan and China]

It is indicative of the qualitative as well as quantitative aspect of the economy.

4. NNP or Net National Product

NNP= GNP – Depreciation
Or,
NNP= GDP+ income from abroad- depreciation

NNP or Net National Product is the purest form of Income. It is the National Income or NI.

We can find the per capita income of a country if we know the NNP and total population.

e.g. (NNP/ total Population) = per capita income