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.