National income measures the total value of goods and services a country produces and the income its people earn in a year. The main indicators are GDP, GNP, NNP and NDP. These terms, their formulas and differences are favourite exam questions.
Gross Domestic Product (GDP)
GDP is the total money value of all final goods and services produced within the boundaries of a country in one year. It counts production inside the country, no matter who owns the factors of production.
Gross National Product (GNP)
GNP is GDP plus the net income earned by a country's residents from abroad.
- GNP = GDP + Net Factor Income from Abroad (NFIA).
- If income sent home from abroad is more than income paid out, GNP is greater than GDP.
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Net Concepts and Costs
- NNP = GNP - Depreciation (wear and tear of capital).
- NDP = GDP - Depreciation.
- NNP at factor cost = National Income.
- Market price includes indirect taxes and excludes subsidies; factor cost = Market price - Indirect taxes + Subsidies.
Per Capita Income
- Per capita income = National Income / Total Population.
- It shows the average income of a person and is used to compare living standards.
- In India, the National Statistical Office (NSO) estimates national income.
- The base year for current GDP series is 2011-12.
Quick Revision Points
- GDP = output produced within the country.
- GNP = GDP + NFIA.
- NNP = GNP - Depreciation.
- National Income = NNP at factor cost.
- Factor cost = Market price - Indirect taxes + Subsidies.
- Per capita income = National Income / Population.
- National income is estimated by the NSO; base year 2011-12.