NATIONAL INCOME FOR UPSC PRELIMS AND MAINS. To Study Ramesh Singh: Ch 1 - GDP, GNP, NDP, NNP & Revised Method (Gist) UPSC Notes | EduRev for UPSC As the national income at 'constant price' is computed based on the real worth of the purchasing power of income, it is also called as 'real national income' or national income in 'real' terms. Some rich countries in terms of national income are poor in human development. It is imperative for every modern country to measure its economic growth. Product subsidies include food, petroleum and fertilizer subsidies, interest subsidies given to farmers, households, etc. Net Domestic Product accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. However, many development economists have criticized that GNP as a measure of welfare has many limitations. NRI. This can be done by borrowing more money from abroad or lending more money to non-residents. This approach can be calculated using the following formula: Consumption refers to private consumption expenditures or consumer spending. The basic idea here is to subtract all those income from National Income that is earned by an individual but has not been received like taxes and add all those incomes which are received by the individuals but has not been earned like Old age Pensions. While GDP indicates productive capacity of an economy, GNP is a crude indicator for living standard. This is because of heavy outflows on account of Trade Deficit and interest payment on foreign loans. GNP - Net income earned from abroad = GDP. Product taxes and product subsidies are paid and received per unit of product. Net domestic product (NDP) is also arrived from GDP by making adjustment with regard to depreciation in the same way described above. NNP = GNP – Depreciations In the first stage of the model, the Household sector provides their services of labour, land, capital and entrepreneurial skills to the Business firms. Oct 05, 2020 - Ramesh Singh: Ch 1 - GDP, GNP, NDP, NNP & Revised Method (Gist) UPSC Notes | EduRev is made by best teachers of UPSC. all make use of the BOP data to make important decisions. While calculating the GDP the issues related to ‘cost’ and ‘Price’ needs to be decided. Also take a look at the following static GK related articles. Thus, saving act as a leakage from the economic system. GDP calculation is conducted by which ministry? Given above are the factors that are responsible for a country’s growth. The three major components of capital account: Current account deficit is financed by a surplus in the capital account and vice versa. NNP= GDP+ income from abroad- depreciation NNP or Net National Product is the purest form of Income. PCI is arrived at by dividing the GDP by the size of population. gnp – घसारा = nnp Money changes hand from one sector to another. In the case of India, though the GDP is growing faster, its performance in terms of HDI is far below than that of many countries. The Central Statistics Office (CSO) is a governmental agency under the Ministry of Statistics and Programme Implementation responsible for co-ordination of statistical activities in India, and evolving and maintaining statistical standards. While calculating GDP, only those goods and services which have a fixed monetary value are taken in to account. B. GDP includes exports; NDP omits exports. For example a residential house in India has a depreciation rate of 1% per annum. NDP is not used for the comparative economies since the rate of depreciation is different for different countries. Gross National Product (GNP) is an estimate of total value of all the final products and services turned out in a given period by the means of production owned by a country’s residents. A country with a large trade deficit is not as likely to import as much as a country with a trade surplus. iv) The problem with NNP is that different countries use different scales to decide depreciation. We can find the per capita income of a country if we know the NNP and total population. Sign In, Create Your Free Account to Continue Reading, Human Rights Day 2018 – Know the Theme, Purpose! just for education and the Ramesh Singh: Ch 1 - GDP, GNP, NDP, NNP & Revised Method (Gist) UPSC Notes | EduRev images and diagram are even better than Byjus! To be used as a tool of economic policymaking. The sum of all incomes accruing to factors of production, i.e., Rent, Interest, Profit and Wages. In case of India, GNP is negative. The Net Domestic Product equals the Gross Domestic Product minus depreciation on a country’s capital goods. Domestic or ‘within the boundary of a nation’ can be illustrated with below two examples. Therefore, while calculating National Income, we must deduct indirect taxes and add subsidies into Net National Product at Market Price. NNP or Net National Product is the purest form of Income. In case you have any doubt on functions of GDP or any other Static Gk article, engage in discussions with Experts and Aspirants here: Get Daily GK & Current Affairs Capsule & PDFs, Sign Up for Free Create free Account? Transactions in existing goods such as second hand cars (resale) are not included, as they do not involve production of new goods. We ask students to login via google as we share a lot of our content over google drive. Thus, the saving which is a leakage in the system also flows back into the system through investment by a firm which acts as injections. Product — ‘Goods and services’ together. Share. It is calculated by subtracting the loss due to depreciation from the GNP. According to Marshall: “The labor and capital of a country acting on its … Businesses use BOP to analyze the market potential of a country, especially in the short term. With inflation as a common feature in almost all the economies, it is necessary to measure the national income after deducting any such increase in the value of any output or income. It’s a body under the Ministry of Statistics and program implementation. ४) nnp -> निव्वळ राष्ट्रीय उत्पन्न. In this case, while the market price of RS 10,000 includes the GST. When TATA makes a car, it uses lots of machines. For starting or understanding any subject, one has to start from very basic and Economics is no exception. Over this one year period, the available plant and machinery (capital) will wear and tear and get condemned. Friends in our previous post we had talked about GDP and GNP.Today in this article we’ll continue it further and talk about NDP and NNP. It is important to clear these concepts not only for RBI Grade B Exam, but also for several other exams like IBPS PO, RRB PO, RRB Office Assistant, Indian Bank PO Exam, SSC, UPSC, etc. DME Assam Recruitment 2020 – Apply for Paramedical Courses Here! ► Economic Growth and Economic Development. It determines the living standards of people in a country. When GDP is calculated by taking in to account the costs of goods and services prevailing in the market, it is known as GDP at market cost. Interest on external loans= balance of the inflow of interest payment (on money lend out of economy) – outflow of interest payment (on the money borrowed by the economy). 33 lessons • 5 h 1 m . using search above. Ramesh Singh: Ch 1 - GDP, GNP, NDP, NNP & Revised Method (Gist) UPSC Notes | EduRev notes for UPSC is made by best teachers who have written some of the best books of NNPFC = NNPMP – Indirect Taxes + Subsidies. GDPMP = GNPMP – Net Factor Income from Abroad. i) NDP of a country is always lower than it’s GDP for a specific year. NNP is arrived at by deducting value of such depreciation from GNP. A/C No: xxxxxxxxxx2695 Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University. Tests & Videos, you can search for the same too. Must Go through Topics for UPSC CSE/IAS (Prelims) Examination. The per capita income of that country will be, 1000 / 10 = 100. GNP: Income earned by nationals inside (GDP) + Income Earned by Nationals Outside –Income earned by the foreign nationals inside. ( Log Out /  Oliveboard Live Courses & Mock Test Series, © 2020 - All Rights Reserved, Friends in our previous post we had talked about, Before talking about NDP and NNP, let us first understand about, The word ‘depreciation’ has been derived from the Latin word ‘, It is an annual measure of economic output of a nation that is adjusted to account for depreciation. i) Per Annum percentage change in GDP is known as ‘growth reate’ of an economy. Copyright © 2018-2021; All Rights Reserved. Trade balance = net outcome at the year end of the total import and export. Consumers spend money to acquire goods and services, such as groceries and haircuts etc. The BOP data is affected by vital macroeconomic variables such as exchange rate, price levels, interest rates, employment, and GDP. The savings in the economy does not lead to any reduction in aggregate spending and income as the savings flows back into the economic system through Financial Markets (Banks, Stock markets, insurance etc.). From Financial Markets, the savings flows back to the Business firms who borrow them and invest it into new forms of investments. We believe that the best way to explain something is real life examples, so we have put examples to make you familiar with the terms. Similar Classes. It helps to measure the contribution made by an individual producer, industry or sector.The relationship between GVA at Factor Cost and GVA at Basic Prices and GDP at market  prices and GVA at basic prices is shown below: GVA at basic prices = factor cost + (Production taxes - Production subsidies), Production taxes and production subsidies are paid and received by the producer and are independent of the volume of actual production.Examples of production taxes are land revenues, stamps and registration fees and tax on profession. Basic Concepts of National Income - GNP, GDP, GNI, NNP, NNI, PCI The standard measures of income and output are Gross National Product (GNP), Gross Domestic Product (GDP), Gross National Income (GNI), Net National Product (NNP), and Net National Income (NNI). Live. They argued that human well-being does not depend on national income alone. Net National Product = GNP – Depreciation. ( Log Out /  But the important question to ask is, where will savings go in the economy? GDP is used to calculate per annum percentage change in the growth rate of an economy. The key difference between GNP and GDP is the exclusion of Net Factor Income Abroad from GDP. Gross domestic product (GDP) is the value of a nation's finished domestic goods and services during a specific time … Personal Income= National Income (NNPFC) – (Undistributed Corporate Profits+ Corporate Taxes + Social Security Contribution) + (Transfer Payments).

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