What is GROSS NATIONAL PRODUCT?

Gross National Product(GNP) is the total value of all final goods and
services produced within a nation in a particular year, plus income earned
by its citizens (including income of those located abroad), minus income of
non-residents located in that country.

GNP can be calculated using the following formula:

GNP= GDP + Net factor income from abroad(NFIA)

where,

GDP = Gross Domestic Product

Net factor income from abroad = difference between income earned in

foreign countries by residents of a country and income earned by non-
residents in that country.
Measurement of Gross National Product

GNP can be measured at:

•Current market prices (Nominal GNP): In this method, the prices of goods and services
are measured at prices prevailing in the current year.

• Constant prices (Real GNP): Using this method, GNP is measured Sat a fixed price of
a particular base year.

•Mace GNP Graphs.xlsx

Facts & Implications

•GNP is the core concept of national income accounting.

•Its rise or fall measures economic activity based on the labor

and production output within a country.

•The figures used to assemble data include the manufacture of

tangible goods such as cars, furniture, and bread, and the
provision of services used in daily living such as education,
health care, and auto repair.

•Intermediate services used in the production of the final

product are not separated since they are reflected in the final
price of the goods or service.
GDP V/S GNP
•GDP is the market value of everything produced within a country; GNP is the value of
what's produced by a country's residents, no matter where they live.

•GDP (gross domestic product) is "the total market value of goods and services
produced within the borders of a country,” regardless of the nationality of those who
produce them;

GNP (gross national product) is the total market value of goods and services produced
by the residents of a country, even if they’re living abroad.

So if a indian resident earns money from an investment overseas, that value would be
included in GNP (but not GDP).And the value of goods produced by foreign-owned
businesses on Indian land would be part of GDP (but not the other measure).
Why GNP is not preferred for measuring Economic development?
For example, if the total value of goods and services produced in a country
during a year was $300 million. This includes $25 million produced by
foreigners working in that country. Besides, the normal residents of the
country settled abroad produced goods and services worth $50 million. In
this case, GDP is $300 million, while GNP is $325 million (300-25+50).

Most countries use real GDP (at constant prices) as a primary tool for
measuring economic development, as GNP by itself is not an adequate
index. This is primarily because the measurement of GNP is generally
distorted and inaccurate, since the calculation of income earned by residents
of a country outside the nation is complex.
Conclusion
GNP helps to measure the contribution of residents of a country to the flow of
goods and services within and outside the national territory.

Hence, Real GNP is an effective tool for making yearly comparisons of

changes in the physical output of a country, as it is not affected by changing
prices.

This helps to reflect the economic growth of a country in a better manner.