Gross National Income
Introduction
Gross National Income ( GNI) plays a considerable role in assessing the economic performance across different economic perspectives within a country. In economy section of competitive exam economic terms has immense importance. In every Govt. Exam like SSC, Bank, Insurance, Civil Services etc economic terms related questions arise and also for enhancing quality of writing in Mains Exam indepth knowledge of economic terms is very much essential. In the current assignment, we will scrutinize the specifics of the GNI, determine how this index is calculated ,and its connection with other indices in the realm of national economy.
A. What is GNI?
Firstly, GNI reveals the income of all residents of a nation, regardless of whether they live there or abroad. Therefore, it functions as a comprehensive measure of a nation’s financial power, reflecting the collective feats of its residents’ hard work and industriousness. Secondly, GNI serves as a useful indicator of the extent to which a country is incorporated into the global economy. For example, it highlights this by the borrowed concepts including the money its nations earn working abroad. Notably, this allows for ascertaining the degree to which a country is connected with international economic markets, labour forces, and investments. Thirdly, it is vital to note that GNI has a pivotal significance for policymakers, economists, and investors since it assists them in making their strategic decisions and evaluations of a country’s economic welfare at a national and international level.
B. Examples of GNI:
GNI is a complex concept that comprises a number of items, including wages or compensation of employees paid to the nation’s residents who work at home or abroad, “gross operating surplus” and “gross mixed income” of the whole country and includes all the firms’ incomes which operate both in the home country and abroad, net rent and property income of the entire country, net interest and miscellaneous investment income and additionally, majority of GNI is made of remittances that foreign citizens send. In addition, a massive portion of GNI is also made of income from foreign assets of royalties and dividends. As such, a nation’s source of income in different ways represents nationals' work and conduct both at home and abroad.
C. How to calculate GNI:
The process of assessing the gross national income included adding all domestic revenue earned by nationals of a specific country no matter where they reside and then deducting the sum of money acquired by foreigners living in the country. In other words, the GNI includes all revenue generated by nationals and any other income added to the sum. Thus, the process implies incorporating both domestic and international revenue, including wages, salaries, profits, rent and interest. The calculation process further implies that net property revenue from abroad, such as dividends and interest from investments made outside the country, should be added. Finally, the total sum would be subtracted from net taxes imposed on imports and outputs. In this way, the continuously extending process provides an all-encompassing picture of the country’s success in terms of economics.
D. The formula for GNI:
The Gross National Product of a nation is added to its net foreign income, net import, and production taxes are also subtracted, and the result is the Gross National Income. This can be stated mathematically as
GNI= GDP + Net property income from abroad − Net taxes on production and imports
GDP Net property income from abroad represents the income derived from foreign investments of residents minus the income derived in the domestic country from foreign residents. Net taxes on production and imports represent the taxes on what is domestically produced and on imports. This formula fully represents the cumulative sum of total income flowing into a country.
E. Difference between GNI and NNI:
|
Aspect |
GNI |
NNI |
|
Definition |
Cumulative revenue received by citizens, both domestic and international, inside a nation's boundaries.
|
Earned income earned by residents after subtracting depreciation and indirect taxes. |
|
Inclusion of Depreciation |
Does not deduct depreciation from income calculations. |
Deducts depreciation to account for the wear and tear of capital assets. |
|
Treatment of Indirect Taxes |
Does not account for the impact of indirect taxes on income. |
Deducts indirect taxes from income to arrive at a net figure. |
|
Measure of Economic Output |
Provides a broader measure of a nation's economic activity. |
Offers a more refined measure, adjusting for depreciation and indirect taxes. |
|
Use in Economic Analysis |
Useful for understanding a country's overall income generation capacity. |
Valuable for assessing the real income available for consumption and investment within the country. |
F. Difference between GNI and GDP:
|
Aspect |
GNI |
GDP |
|
Definition |
Total revenue earn by domestic and foreign inhabitants inside national borders. |
Monetary rate of all commodities and services irrespective of ownership created within national borders. |
|
Scope of Measurement |
Includes income earned by citizens domestically and abroad. |
Considers only production activities within the national geographical borders. |
|
Inclusion of Foreign Revenue |
Accounts for income earned by nationals both domestically and internationally. |
Excludes revenue earned by nationals overseas, but includes income earned by foreigners within the nation. |
|
Treatment of Production Activities |
Emphasizes income generation by residents, regardless of location. |
Focuses on economic activities not considering of who carries them out, within the national borders. |
|
Use in Economic Analysis |
Offers insights into a nation's overall income generation capacity, reflecting its global economic integration. |
Provides an assess of a nation’s domestic financial activity and production performance. |
|
Comparison with National Income |
Often higher than Net National Income (NNI) due to the inclusion of foreign income. |
May differ from National Income due to adjustments for depreciation and indirect taxes. |
G. National Income (NI) vs Gross National Income (GNI):
|
Aspect |
NI |
GNI |
|
Definition |
Total revenue earned by factors of production within national borders. |
Total revenue earned by local and foreign residents within national borders. |
|
Scope of Measurement |
Focuses on revenue generated within a nation’s geographical boundaries. |
Encompasses income earned by citizens domestically and abroad. |
|
Inclusion of Foreign Income |
Excludes returns earned by nationals in abroad. |
Includes returns earned by nationals both domestically and internationally. |
|
Treatment of Production Activities |
Emphasizes income generated by domestic factors of production. |
Considers income earned by residents, regardless of location or the source of income. |
|
Use in Economic Analysis |
Offers insights into a nation's internal income distribution and economic activity. |
Provides a broader perspective, reflecting a country's global economic integration and income from abroad. |
|
Comparison with Gross Domestic Product |
Typically lower than Gross Domestic Product (GDP) due to adjustments for depreciation and indirect taxes. |
May differ from GDP due to the inclusion of foreign income and adjustments for net taxes on production and imports. |
H. Difference between GNI at market price and GNI at factor cost:
|
GNI at Market Price |
GNI at Factor Cost |
|
Total revenue earned by inhabitants, inclusive of taxes and subsidies on commodities and services produced. |
Total returns gained by inhabitants from factors of production, excluding taxes and subsidies. |
|
Reflects the value of commodities and services created, including production and imports taxes, and subsidies. |
Focuses solely on income generated from factors of production, without considering taxes and subsidies. |
|
Includes indirect taxes (such as sales tax) and subsidies (such as agricultural subsidies) in the calculation. |
Excludes indirect taxes and subsidies, providing a purer measure of income earned from production. |
|
Useful for assessing the overall economic output and income generation capacity of a country. |
Valuable for understanding the income earned by factors of production, facilitating analysis of income distribution and economic efficiency. |
|
Corresponds to GNI at market price in the national accounts framework. |
Corresponds to GNI at factor cost in the national accounts framework. |
|
Reflects adjustments for production and imports related net taxes, adding subsidies and deducting indirect taxes. |
Does not comprise adjustments for taxes and subsidies, providing a more fundamental measure of income from production. |
I. GNI of India since inception to 2023
|
Year |
GNI Per Capita (US $) |
|
2022 |
$2,390 |
|
2021 |
$2,150 |
|
2020 |
$1,900 |
|
2019 |
$2,080 |
|
2018 |
$1,980 |
|
2017 |
$1,800 |
|
2016 |
$1,660 |
|
2015 |
$1,590 |
|
2014 |
$1,550 |
|
2013 |
$1,500 |
|
2012 |
$1,470 |
|
2011 |
$1,360 |
|
2010 |
$1,210 |
FAQS
A. What is Net National Income
“Net National Income” (NNI) is the total income earned by a country's residents after subtracting depreciation and indirect taxes.
B. What is Gross National Income per capita
“Gross National Income” (GNI) per capita is the average income earned by each person in a nation, calculated by dividing the total “Gross National Income” (GNI) by the residents.
C. What is Gross National disposable Income?
“Gross National Disposable Income” (GNDI) represents the total revenue available for consumption or saving by residents and businesses in a country after deducting taxes and adding transfers from abroad.
D. Which country has the highest Gross National Income?
As of the latest available data, the United States usually has the highest “Gross National Income” (GNI) among all countries.