Gross National Product

Also called: GNP, GNPMP, Gross National Income, GNI · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 11, Ch 6 "Employment: Growth, Informalisation and Other Issues"; Class 12, Ch 2 "National Income Accounting"

Meaning

Gross National Product (GNP) is the market value of all final goods and services produced in one year by a country's normal residents (people and institutions whose main economic interest lies in that country), whether they produce it at home or abroad.

Formula: GNP_MP = GDP_MP + NFIA, where NFIA (net factor income from abroad) = factor income earned by our residents abroad − factor income earned by foreigners inside our country.

• GDP tells you what is produced inside the country. GNP tells you how much of that income belongs to the country's own people.
• Under the SNA 2008 system (the UN's global rulebook for national accounts), the same measure is called GNI (Gross National Income). GNI is GDP adjusted for net income flows from abroad [3].

Explanation

How it works: from "where" to "who"

• GDP is based on place. It counts all output made inside the domestic territory, whether residents or non-residents produce it.
• The domestic territory covers the political frontiers (land, territorial waters and airspace).
• It also covers the country's own ships, aircraft and embassies abroad. These count as "inside".

• Foreign embassies located in the country are left out. They count as "outside".

• GNP is based on people. It follows the normal resident wherever they work.

• We add income our residents earn abroad.

• We subtract income foreigners earn inside our borders.

• The difference between the two is NFIA. So GNP is simply GDP with one correction.

Components of NFIA

• Factor income is the payment made to a factor of production:
• wages for labour
• rent for land
• interest for capital

• profit for enterprise

• Plus side: an Indian nurse's wage in Saudi Arabia adds to NFIA.

• Minus side: the profits of the Korean-owned Hyundai plant in India are subtracted from NFIA.
• Not in NFIA: worker remittances (money sent home as a gift, with nothing given in return). They are current transfers, not payment for current work abroad. They enter national disposable income, not GNP.

Where GNP sits in the aggregates chain

• GDP → (+NFIA) → GNP → (−depreciation) → NNP_MP → (−net indirect taxes) → NNP_FC = National Income.
• Each step changes only one thing:
• domestic → national: add NFIA
• gross → net: subtract depreciation (wear and tear of machines and buildings; the official name is consumption of fixed capital, CFC)

• market price → factor cost: subtract net indirect taxes (indirect taxes minus subsidies)

• GNP_FC = GNP_MP − net product taxes − net production taxes. This is GNP counted at the prices actually paid to the factors.

Worked example: GDP_MP = 1,000, NFIA = −20, depreciation = 100, net indirect taxes (NIT) = 80.

• GNP_MP = 1,000 + (−20) = 980
• GNP_FC = 980 − 80 = 900
• NNP_MP = 980 − 100 = 880 (check: NDP_MP 900 + NFIA −20 = 880 ✓)
• NNP_FC (National Income) = 880 − 80 = 800
• Because NFIA is negative here, GNP (980) is smaller than GDP (1,000).

What makes GNP rise or fall relative to GDP

• GNP > GDP (positive NFIA): residents earn more abroad than foreigners earn at home.

• Example: many citizens work abroad and are paid wages there, or the country's firms own large businesses overseas.

• GNP < GDP (negative NFIA): foreigners earn more inside the country than residents earn abroad.

• Foreign investors own many companies, shares and loans in the country.
• The country pays them interest, dividends and profits.
• These outflows are larger than what residents earn abroad.

In India

• Who measures it: MoSPI (Ministry of Statistics and Programme Implementation), through the NSO, publishes GNI with its GDP estimates. It follows SNA 2008 and plans to move to SNA 2025 at the next base revision [3].
• New series: MoSPI released the new series with base year 2022-23 on 27 February 2026, covering 2022-23 to 2025-26 [2][3]. A back series (past years worked out again with the new methods) is expected by December 2026 [3].
• Latest figures (current prices):

Year	GDP (₹ crore)	GNI (₹ crore)	NFIA (₹ crore, derived)
2024-25	3,18,07,309	3,13,98,006	≈ −4,09,303
2025-26 (Provisional Estimates)	3,46,35,638	3,42,04,634	≈ −4,31,004

Sources for the table: [2]; NFIA derived from [2].

• In 2025-26, NFIA was about −1.2% of GDP (derived from [2]). So in India, GNI < GDP [2].
• Why negative: India pays more interest, dividends and profits to foreign owners of capital in India than Indians earn in wages and investment income abroad.
• But India receives more than it pays out overall: net current transfers (mostly remittances) were about ₹11,97,004 crore in 2025-26, about 3.5% of GDP. This is much larger than the NFIA outflow. So GNDI (₹3,54,01,638 crore) > GDP > GNI in 2025-26 (derived from [2]).

Don't confuse with

• GDP: counts output made inside the borders by anyone. GNP counts output of residents anywhere. The only gap between them is NFIA.
• Gross National Disposable Income (GNDI): adds current transfers from abroad (remittances, gifts, aid) on top of national product. Remittances raise GNDI but not GNP.
• National Income (NNP_FC): this is GNP minus depreciation minus net indirect taxes. GNP is gross and at market price. National Income is net and at factor cost.
• MoSPI's "NNI": MoSPI's NNI = GNI − CFC [3]. It is at market prices, so it equals NNP_MP in NCERT terms, not NCERT's "National Income" (derived from [2][3]).

Prelims Hooks

• GNP = GDP + NFIA. Under SNA 2008 it is called GNI [3].
• India's NFIA is negative (≈ −₹4.31 lakh crore in 2025-26), so GNI < GDP [2].
• Trap: Remittances are current transfers, not factor income. They are left out of GNP but included in national disposable income.
• Trap: The Hyundai plant's profits in India are in India's GDP but are subtracted when working out India's GNP. An Indian nurse's wage in Saudi Arabia is not in India's GDP but is in India's GNP.
• Trap: Foreign embassies in India are outside India's domestic territory. Indian embassies abroad are inside it.
• NNP_MP = GNP_MP − depreciation = NDP_MP + NFIA. For 2025-26: NDP ₹2,99,93,131 crore + NFIA (−₹4,31,004 crore) = NNI ₹2,95,62,127 crore [2].

Mains Points

• GDP vs GNI as a welfare measure:
• Headline GDP overstates how much income Indians actually own. A part of it flows out as profits and interest to foreign investors, so NFIA is negative [2].
• Large remittance inflows mean households can spend more than they earn from production. So GNDI and personal disposable income (PDI) show welfare better than GDP alone [2].

• Policy links: diaspora incentives, lowering the cost of sending remittances, and weighing the cost of foreign capital (future profit outflows) against its benefit (investment and jobs).

• Foreign investment and the GDP–GNI gap (GS-III):

• More FDI and foreign borrowing → more output inside India → higher GDP.
• But more output owned by foreigners → larger dividend and interest outflows → the GNI gap widens.

• So growth strategy should also aim to build Indian-owned capital and raise Indian earnings abroad.

• Statistical credibility (GS-II/III): The 2022-23 base, five-yearly base revisions, the planned move to SNA 2025 and the back series due in December 2026 make GDP and GNI more comparable over time and more trusted. But base changes can also reset growth rates and levels, which can start public debate [3].

Related concepts

• Net factor income from abroad
• Normal residents
• Domestic territory
• Net Domestic Product
• NDP at factor cost
• Net National Product
• GNP at factor cost
• National income
• Personal income
• Undistributed profits

Read more

• From GDP to personal disposable income: the aggregates chain