What Is The Difference Between GNP & GDP? | UPSC Economics

Gross National Product(GNP) is the total value of all the goods and services that are produced by the residents and businesses of a country. GNP doesn’t rely on the location of the production, it takes the investments made by the businesses and residents of the country into account. GNP doesn’t consider foreign national’s businesses and products produced by foreign companies.

The importance of GNP is considered an important economic indicator by economists. It is also used for finding solutions to economical issues like poverty and inflation. GNP is considered more reliable than GDP.

The important elements of GNP are Consumption expenditure, investment, government expenditure, Net exports, and Net Income.

This is the mathematical formula for calculating GNP: GNP= Consumption expenditure+ Investment+ government expenditure+ Net exports+ Net income

Manufacturing of items like machinery, agricultural products, and cars, and other fundamental services like education, health care, and consulting are also a part of GNP.

There are a few drawbacks to GNP which are the value of foreign currency changes, this value impacts a lot on the calculation. GNP is useless to determine whether the economy of the country is expanding or contracting.

What is the difference between GDP and GNP?

GDP(Gross Domestic Product) and GNP(Gross National Product) major differences are that the domestic income may not fall under the national income. Gross domestic product (GDP) is the value of the finished domestic goods and services produced within a nation’s borders. On the other hand, gross national product (GNP) is the value of all finished goods and services owned by a country’s citizens, whether or not those goods are produced in that country.

For example, if an Indian employee is working in an overseas company. The income will be considered as national income because the employee is an Indian resident. The same shall not come under domestic income because the overseas company is not a part of the Indian territory.

GNP and GDP are the popular features for the productivity of a country’s economy. Just like GNP, GDP is also calculated every financial year and helps in generating the income of the country.

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