GNP deflator
Topic: Inflation and Index Numbers: CPI, WPI, IIP and the Deflator · NCERT: Class 12, Ch 2 "National Income Accounting"
Meaning
The GNP deflator measures the change in prices of everything counted in a country's Gross National Product (GNP): GNP deflator = (nominal GNP ÷ real GNP) × 100. Nominal GNP values output at current prices. Real GNP values the same output at base-year prices. Because the output is the same in both, the ratio shows only price change. A value above 100 means prices have risen since the base year. A value below 100 means they have fallen.
Example
Say nominal GNP is ₹2,500 crore and real GNP is ₹3,000 crore (a Class 12 NCERT exercise). Then the deflator is 2,500/3,000 × 100 = 83.3. This means prices have fallen since the base year.
Don't confuse with
- GDP deflator: it uses GDP, which is domestic output. GNP adds net factor income from abroad. Both are implicit indices with changing weights.
- CPI: it uses a fixed consumer basket and includes imported goods.