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ntrod     tion   1.17
The normal formula is GNP = GDP + Income           nnP
from Abroad. But it becomes GNP = GDP +
Net National Product (NNP) of an economy is the
(– Income from Abroad), i.e., GDP – Income
GNP after deducting the loss due to ‘depreciation’.
from Abroad, in the case of India. This means that
The formula to derive it may be written like:
India’s GNP is always lower than its GDP.
NNP = GNP – Depreciation
The different uses of the concept GNP are as
given below:                                                                      or,
(i) This is the ‘national income’ according             NNP = GDP + Income from Abroad –
to which the IMF ranks the nations of          Depreciation.
the world in terms of the volumes—at                The different uses of the concept of NNP are
purchasing power parity (PPP). For a           as given below:
detailed discussion on PPP please see               (i) This is the ‘National Income’ (NI) of an
Chapter 24. India is ranked as the 3rd                  economy. Though, the GDP, NDP and
largest economy of the world (after China               GNP, all are ‘national income’ they are
and the USA), while as per the nominal/                 not written with capitalised ‘N’ and ‘I’.
prevailing exchange rate of rupee, India           (ii) This is the purest form of the income of a
is the 7th largest economy (IMF, April                  nation.
2016). Now such comparisons are done              (iii) When we divide NNP by the total
using the GDP, too.                                     population of a nation we get the ‘per
(ii) It is the more exhaustive concept of                    capita income’ (PCI) of that nation,
national income than the GDP as it                      i.e., ‘income per head per year’. A very
indicates towards the ‘quantitative’ as well            basic point should be noted here that
as the ‘qualitative’ aspects of the economy,            this is the point where the rates of
i.e., the ‘internal’ as well as the ‘external’          depreciation followed by different nations
strength of the economy.                                make a difference. Higher the rates of
(iii) It enables us to learn several facts about              depreciation lower the PCI of the nation
the production behaviour and pattern                    (whatever be the reason for it logical or
of an economy, such as, how much the                    artificial as in the case of depreciation
outside world is dependent on its product               being used as a tool of policymaking).
and how much it depends on the world                    Though, economies are free to fix any
for the same (numerically shown by                      rate of depreciation for different assets,
the size and net flow of its ‘balance of                the rates fixed by them make difference
trade’); what is the standard of its human              when the NI of the nations are compared
resource in international parlance (shown               by the international financial institutions
by the size and the net flow of its ‘private            like the IMF, WB, ADB, etc.
remittances’); what position it holds               The ‘Base Year’ together with the
regarding financial support from and to        ‘Methodology’ for calculating the National
the world economies (shown by the net          Accounts were revised by the Central Statistics
flow of ‘interests’ on external lending/       Office (CSO) in January 2015, which is given in
borrowing).                                    the forthcoming pages.
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