GNP, GNI, NNP, NDP, GVA - Definitions and Differences for UPSC

Quick Facts for FY 2024‑25

• India’s Gross National Income (GNI) at current prices was about ₹3 25.90 lakh crore in FY 2024‑25. GNI is lower than GDP because India’s net factor income from abroad (earnings by residents minus payments to foreign factors) was negative, around –₹4.78 lakh crore.
• Net National Income (NNI), also called national income, stood at roughly ₹2 89.10 lakh crore. This figure is obtained by subtracting depreciation and net indirect taxes from GNP.
• Net Domestic Product (NDP) was about ₹2 93.88 lakh crore, showing the value of goods and services produced within India after accounting for capital consumption (depreciation). Depreciation in FY 2024‑25 was around ₹36.80 lakh crore.
• India’s Gross Value Added (GVA) at basic price was about ₹3 00.22 lakh crore. Adding net product taxes (indirect taxes minus subsidies) of roughly ₹30.46 lakh crore gives GDP at market price.
• Per capita figures at current prices were: GDP ₹2,34,859, GNI ₹2,31,462, NDP ~₹2,08,720 (approx.), and NNI ₹2,05,324. The negative net factor income from abroad works out to about –₹3,400 per person.
• At constant 2011‑12 prices, real GNI was about ₹1 85.23 lakh crore and real NNI about ₹1 61.51 lakh crore, while real GDP was ₹1 87.97 lakh crore.

Why multiple aggregates?

No single number can fully capture the economic activity of a large and diverse country like India. Policymakers and economists therefore compile several aggregates to answer different questions:

• Domestic vs. National: GDP counts production within the geographical territory of India, including output produced by foreign companies located here. GNP or GNI adds income earned by Indians abroad and subtracts income earned by foreigners in India. When net factor income from abroad is positive, GNI exceeds GDP; when it is negative (as in India), GNI is lower.
• Gross vs. Net: ‘Gross’ measures include total production, while ‘net’ measures subtract consumption of fixed capital (depreciation). NDP and NNP show the economy’s sustainable output after replacing worn‑out capital. Depreciation is substantial in a growing economy; in FY 2024‑25 it was almost ₹37 lakh crore.
• Product vs. Income: GDP and GNP focus on the market value of goods and services produced (product approach). GNI and NNI emphasise the income earned by residents (income approach). In a closed economy without taxes or subsidies, product and income measures would be identical.
• Factor cost vs. Market price: Factor cost values output using payments to factors of production (wages, interest, rent and profit). Market price includes product and production taxes and excludes subsidies. Adjusting between these concepts helps evaluate policies such as GST or subsidies.

Having multiple aggregates allows analysts to choose the most appropriate measure for the issue at hand, whether it is comparing living standards (per capita NNI), assessing domestic demand (NDP), or international comparisons (GNI).

Definitions of GNP, GNI, NNP, NDP and GVA

The national accounts use precise definitions to avoid confusion. The following explanations summarise these aggregates in simple terms:

• Gross Domestic Product (GDP): The monetary value of all final goods and services produced within India’s borders in a given period. It includes production by foreign companies operating in India but excludes income earned by Indian residents abroad.
• Gross National Product (GNP): GDP plus Net Factor Income from Abroad (NFIA). NFIA is the income Indians earn from investments and work abroad minus income that foreigners earn in India. GNP measures output produced by Indian nationals regardless of where they work.
• Gross National Income (GNI): In modern national accounts, GNI has largely replaced GNP. It sums the incomes (wages, profits, interest and rents) earned by residents of a country, whether domestically or abroad. Since product and income approaches give the same total, GNI is numerically equal to GNP when valued at factor cost.
• Net National Product (NNP): GNP minus depreciation of fixed capital. Depreciation accounts for the wear and tear of machinery, buildings and equipment. NNP is a better indicator of the income available for consumption and saving because it recognises that part of gross production must be used to replace capital assets.
• Net National Income (NNI): NNP at factor cost. It removes indirect taxes and adds subsidies to NNP at market price, giving the actual income earned by residents. In everyday usage, NNI is called National Income.
• Net Domestic Product (NDP): GDP minus depreciation. It measures the net value of goods and services produced within the country after accounting for capital consumption. NDP is useful for analysing domestic demand and saving.
• Gross Value Added (GVA): The sum of value added by all producers within an economy at basic price. GVA is calculated sector‑wise (agriculture, industry, services). To obtain GDP at market price, add net product taxes (indirect taxes minus subsidies) to GVA: GDP = GVA + Net Taxes.

Factor cost versus market price

Understanding the difference between factor cost and market price is important for UPSC aspirants. The price of a good at the factory gate (factor cost) differs from the final price paid by consumers (market price) because of taxes and subsidies:

• Factor cost is the sum of payments to factors of production: wages to labour, rent to landowners, interest to capital providers and profit to entrepreneurs.
• Production taxes (e.g., property tax, vehicle tax) are levied on businesses regardless of the value or quantity produced. They increase the cost of production but are not linked to output.
• Product taxes (e.g., GST, excise duty, customs duty) are imposed on the value of goods or services at the point of sale. They raise the market price.
• Subsidies are government payments that reduce producers’ costs or consumers’ prices. For example, fertiliser and power subsidies lower the price farmers pay for inputs.

The relationships among these concepts can be summarised as:

• Basic price = Factor cost + Production taxes – Production subsidies
• Market price = Basic price + Product taxes – Product subsidies
• GDP at market price = GVA at basic price + Net product taxes

In India, indirect taxes such as GST and excise duty exceed subsidies, so GDP at market price is higher than GVA at basic price. When answering prelims questions, remember that national income (NNI) is NNP at factor cost and that GDP at factor cost is no longer published in official series; GVA at basic price is used instead.

Formulas & examples

The following formulas help relate the national income aggregates:

• GNP/GNI = GDP + Net Factor Income from Abroad (NFIA)
• NDP = GDP – Depreciation
• NNP = GNP – Depreciation
• NNI = NNP – (Indirect taxes – Subsidies) = NNP at factor cost
• GDP = GVA + Net Product Taxes
• GVA = Sum of sectoral value added at basic price

Let us illustrate these relationships with FY 2024‑25 data (provisional):

• Net Factor Income from Abroad (NFIA) = GNI – GDP = 3 25.90 lakh crore – 3 30.68 lakh crore ≈ –4.78 lakh crore. India is a net payer of factor income to the rest of the world.
• Depreciation = GDP – NDP = 3 30.68 lakh crore – 2 93.88 lakh crore ≈ 36.80 lakh crore.
• Gross National Product (GNP) at market price = GDP + NFIA = 3 30.68 + (–4.78) ≈ 3 25.90 lakh crore. This is the same as GNI when valued at factor cost.
• Net Domestic Product (NDP) = GDP – Depreciation = 3 30.68 – 36.80 ≈ 2 93.88 lakh crore.
• Net National Product (NNP) = GNP – Depreciation ≈ 3 25.90 – 36.80 ≈ 2 89.10 lakh crore. When adjusted for indirect taxes and subsidies, this becomes Net National Income (NNI).
• Gross Value Added (GVA) at basic price = GDP – Net product taxes = 3 30.68 lakh crore – 30.46 lakh crore ≈ 3 00.22 lakh crore.
• Per capita values show how these aggregates translate to average incomes: per capita GNI ≈ ₹2.31 lakh, per capita NNI ≈ ₹2.05 lakh, per capita NDP ≈ ₹2.09 lakh, and depreciation per capita ≈ ₹26,000. Negative NFIA per capita is around –₹3,400.

Comparison table

The table below summarises the key national income aggregates, their formulas and India’s provisional figures for FY 2024‑25 at current prices. Figures are rounded for simplicity.

UPSC previous year questions (PYQs)

UPSC prelims often test conceptual clarity on national income aggregates. Below are illustrative past questions and their answers:

1. Prelims 2020: Consider the following statements:
   1. Net National Income at factor cost is equal to Net National Product at market price.
   2. In India, Net Factor Income from Abroad has been persistently positive for the last decade.
   Which of the statements is/are correct?
   Answer: Only statement 1 is correct if we adjust for indirect taxes and subsidies. Net National Income (NNI) is NNP at factor cost. Statement 2 is incorrect because India’s NFIA is negative due to remittances paid to foreign investors and workers.
2. Prelims 2013: The national income of a country for a given period is equal to which of the following?
   (a) GDP at market price minus net indirect taxes
   (b) GNP at market price minus depreciation
   (c) GNP at factor cost minus depreciation
   (d) GDP at factor cost plus NFIA
   Answer: Option (b) is correct. National income (NNI) is GNP at market price minus depreciation, adjusted for indirect taxes and subsidies (equivalently, NNP at factor cost).
3. Mains 2022 (General Studies III): “Distinguish between Gross Domestic Product (GDP) and Gross National Product (GNP). Discuss why GNP may be smaller than GDP in some developing economies like India.”
   Guideline: In your answer, define GDP and GNP, mention the role of net factor income from abroad and explain why India’s NFIA is negative (outward remittances, foreign investment profits etc.), leading to GNP being lower than GDP.

Practice MCQs

Test your understanding of national income concepts:

1. Which of the following items is included in Gross National Product (GNP) but not in Gross Domestic Product (GDP)?
   (a) Depreciation
   (b) Net factor income from abroad
   (c) Net indirect taxes
   (d) Consumption of fixed capital
   Answer: (b) Net factor income from abroad.
2. If depreciation rises while all other components remain constant, which of the following will decline?
   (a) GNP only
   (b) GDP only
   (c) NDP and NNP
   (d) NFIA
   Answer: (c) NDP and NNP will decline because depreciation is subtracted from gross measures to obtain net measures.
3. Why is India’s Net Factor Income from Abroad (NFIA) negative?
   (a) Indians receive more interest and dividends from abroad than foreigners earn in India
   (b) India’s payments to foreign investors and expatriate workers exceed the income of Indians working abroad
   (c) India has a trade deficit in goods and services
   (d) None of the above
   Answer: (b) India pays out more factor income to foreign investors and expatriate workers than it receives from Indians abroad.
4. Arrange the following aggregates in descending order for India (FY 2024‑25):
   1. Gross Domestic Product (GDP)
   2. Net Domestic Product (NDP)
   3. Gross National Income (GNI)
   4. Net National Income (NNI)
   (a) GDP > GNI > NDP > NNI
   (b) GNI > GDP > NDP > NNI
   (c) GDP > NDP > GNI > NNI
   (d) GNI > NDP > GDP > NNI
   Answer: (a) GDP is highest, followed by GNI, NDP and NNI.
5. Which statement about Gross Value Added (GVA) is correct?
   (a) GVA is always greater than GDP
   (b) GVA measures the value added at basic price and excludes net product taxes
   (c) GVA is calculated only for the primary sector
   (d) GVA and GDP are identical measures
   Answer: (b) GVA equals GDP minus net product taxes and is compiled sector‑wise across the economy.

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• National Income Accounting – Methods and Issues
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