National Income implies the ultimate outcome of various economic activities of a country, conducted during given period, valued in monetary terms. It is the supreme macroeconomic variable that helps to gauge the economic soundness of the nation. Of different measures employed in the analysis of national income GDP and GNP are greatly used. GDP or otherwise called as gross domestic product delineates the sum total of the market value of all goods and services, produced within the geographical boundary of the nation in a given year.

On the other hand, Gross National Product or GNP is the aggregate market value of all goods and services created or produced during a particular period and net factor income from abroad.

There is a fight between the two measures, regarding which one is a better indicator of economic strength. The significant differences between GDP and GNP are discussed in this article excerpt. Have a look.

Gross Domestic Product or GDP, is the value of everything that is produced within the country’s domestic territory in a particular financial year. During the calculation of GDP, the primary focus is to capture the goods produced or services rendered within the nation’s border, whether the output is produced by the residents or non-residents of the country. The output produced outside the geographical boundaries of the country are not included in GDP.

GDP is an indicator of the size of the economy. It reflects the aggregate of consumption, investments, spending by the government and net export (export – import). In general, the GDP is calculated for one year. However, it can also be calculated for any term to forecast economic trends.

Gross National Product or GNP is the total market value of everything (i.e. goods and services) produced by the residents of the country during a particular accounting year.

GNP includes the income earned by the country’s nationals within and outside the country, but it excludes the income earned by the foreign citizens and companies within the country. You can understand the statement, through an example: There are many enterprises which are operating outside the country. Many citizens of a country work in another country. The income earned by all these persons is known as factor income earned from abroad.

Likewise, non-residents render factor services within the domestic territory of the country for which they earn income. When you deduct the factor income paid to non-residents for rendering services from factor income received from abroad, the result will be the Net Factor Income received from Abroad (NFIA).

To calculate GNP, you need, to sum up, GDP and NFIA (i.e. The income earned by the residents abroad less non-residents within the country).

The major differences between GDP and GNP are explained in the given below points:

The most important distinguishing point between these two is that while we calculate GDP, we take into consideration whatever is produced within the local borders of the country and so it includes the goods and services produced by the foreign nationals also but if we talk about GNP, only the production done by the country’s citizens is considered whether they are inside or outside the country and the contribution of foreign citizens are completely excluded.