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What is National Income?

It is easy to calculate the income of an individual or income of a family. Is it possible to find the income of a nation? Yes, it is possible. The income of a nation can be calculated by four different ways. They are,

  • GDP – Gross Domestic Product
  • NDP – Net Domestic Product
  • GNP – Gross National Product
  • NNP – Net National Product

What is GDP?

GDP is the monetary value of the all finished goods and services produced within the boundary of a country in an year.  Usually, GDP is expressed as a comparison to the previous year. For example, if the year-to-year GDP is up 5%, this is thought to mean that the economy has grown by 5% over the last year. GDP calculation includes income of foreigners in a Country but excludes income of those people who are living outside of that country.

What is NDP?

NDP includes the depreciation happened in the assets while the goods and services were produced. Net domestic product accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration.

NDP = Gross Domestic Product – Depreciation. 

The depreciation accounted for is often referred to as capital consumption allowance and represents the amount needed in order to replace those depreciated assets.

What is GNP?

GNP is the value of all final goods and services produced by the citizens of a country in a financial year.

While Calculating GNP, income of foreigners in a country is excluded but income from abroad (interest of external loans and foreign remittances) from the people who are living outside of that country is included. The value of GNP is calculated on the basis of GDP.

If a person working in UK or USA sends money to India, it is calculated in GNP. At the same time, if a person belongs to USA works in India and earns money, it is excluded.

GNP = GDP + Income from Abroad – Income of Foreigners inside the country

What is NNP?

Net National Product (NNP) in an economy is the GNP after deducting the loss due to depreciation.

NNP = GNP – Depreciation.
While calculating income, the two major things to consider is
  • Factor Cost
  • Market Price

Factor Cost is nothing but the input cost. It can be also called Production Cost. It includes raw materials cost, salary of the workers, machine cost, and other things.

Market Cost is nothing but the showroom price. It includes indirect taxes, transportation cost, showroom maintenance cost, salary of the workers, and some marginal amount of profit.

NNP at Factor cost = NNP at Market cost – Indirect taxes + Subsidies