Concept of GDP, GNP, NNP and NDP,

Basic Economy Terms

GDP, GNP, NNP, and NDP are key economic indicators that measure the value of
goods and services. Know Concept of GDP, GNP, NNP and NDP in Indian Economy.

Concept of GDP, GNP, NNP and NDP

In the realm of economics, comprehensive measurements are crucial for assessing the
health and performance of a nation’s economy. Key among these indicators is GDP,
GNP, NNP, and NDP, which provide insights into a country’s economic output, income
generation, and net value added. These metrics serve as essential tools for
policymakers, analysts, and researchers to gauge the economic well-being of a nation,
identify trends, and make informed decisions.
By delving into the intricacies of these indicators, we can uncover the dynamics that
shape economies and understand how they contribute to the overall prosperity and
development of a country.

Concept of GDP, GNP, NDP, NNP at Market Price and

Factor Cost
Let us first understand the concept of Factor Cost and Market Price.

Factor Cost

Factor cost refers to the total cost incurred in the production of goods and services. It
includes the actual costs of production, such as wages, rent, interest, and raw materials.
Factor cost excludes indirect taxes (such as sales tax or value-added tax) and includes
subsidies.
 Market Price

Market price refers to the price at which goods and services are actually bought and
sold in the market. It includes the cost of production as well as any applicable taxes and
subsidies. Market price reflects the value of the final goods and services when they are
purchased by consumers.
GDP, GNP, NDP, NNP: Basics of National Income
Now, we are in a position to understand the concepts of GDP, NDP, NNP, and GNP at
factor cost and market price.

GDP (Gross Domestic Product)

GDP measures the total value of all final goods and services produced within the
borders of a country during a specific time period, typically a year. It includes the value
of goods and services produced by both domestic and foreign factors of production
within the country. GDP represents the overall economic output of a nation.
 GDP at Factor Cost = Market Value of Final Goods and Services – Indirect Taxes +
Subsidies
 GDP at Market Price = GDP at Factor Cost + Indirect Taxes – Subsidies

NDP (Net Domestic Product)

NDP is derived from GDP by subtracting the value of depreciation or the wear and tear
of capital goods (such as machinery, buildings, and equipment) during the production
process. NDP provides a measure of the net value added by the economy after
accounting for the replacement or renewal of depreciated capital.
 NDP at Factor Cost = GDP at Factor Cost – Depreciation
 NDP at Market Price = GDP at Market Price – Depreciation

GNP (Gross National Product)

GNP measures the total value of all final goods and services produced by the residents
of a country, regardless of their location, within a specific time period. It includes the
domestic production of goods and services as well as the net income earned from
 abroad by residents of the country, such as profits, wages, and salaries generated by
overseas investments.
 GNP at Factor Cost = GDP at Factor Cost + Net Income from Abroad – Depreciation
 GNP at Market Price = GNP at Factor Cost + Indirect Taxes – Subsidies
NNP (Net National Product)
NNP is derived from GNP by subtracting the value of depreciation. Similar to NDP, NNP
represents the net value added by the economy after accounting for the depreciation of
capital goods. It provides a measure of the nation’s net income and output.
 NNP at Factor Cost = GNP at Factor Cost – Depreciation
 NNP at Market Price = NNP at Factor Cost + Indirect Taxes – Subsidies

Difference between GNP and NNP

Here’s a tabulated form outlining the key differences between GNP (Gross National
Product) and NNP (Net National Product):
Aspect GNP (Gross National Product) NNP (Net National Product)
Total value of goods and services Net value added by residents after
Definition produced by residents, regardless accounting for depreciation, both
of their location. domestically and from abroad.
Domestic production and net Domestic production and net
Components
income earned from abroad. income earned from abroad.
Deducted to calculate the net value
Depreciation Not explicitly accounted for.
added.
Indirect Taxes Excludes indirect taxes. May include indirect taxes.
Subsidies May exclude subsidies. May include subsidies.
Measures income generated by a Measures net value added by a
Perspective
country’s residents. country’s residents.
Reflects the economic activities of Reflects the net income and value
Economic
residents regardless of where added by residents, accounting for
Focus
they are located. depreciation.