GDP vs. GNP: What's the Difference?

The gross national product which is called GNP and the Gross Domestic Product which is called GDP are two of the most essential and basic concepts that the students of Commerce need to know. Briefly, we can say that the Gross Domestic Product or the GDP is the value of finished goods and services of the nation at the domestic level and in the specific period. While on the other hand gross national product which is to say GNP is the total value of all the finished goods and the services produced by the citizens of the country.

But there is so much more to learn for the students of the commerce when it comes to the GDP and GNP and hence Vedantu provides all of those things to the students completely free of cost.

National Income 

National income broadly means the value of services and goods that are produced by a country within a particular financial year. It can be considered as the net outcome of all the economic activities. It amounts to the income that accrues to a country arising from all the economic activities combined within a financial year.

For instance, the revenues that are generated by the country’s companies, the tax revenues or the paid wages will amount to national income.

Domestic Income 

Domestic income is the aggregate of all the factors of income that are found to be generated by the production units located within a country’s domestic territory. Domestic income is calculated within a particular financial year. 

The domestic factor includes the factor of undertaking business within the same country as its principal.

Difference Between National Income and Domestic Income 

The major point of difference between domestic income and national income is that the factors that may comprise domestic income may not fall under national income and vice versa. It is due to the fact that national income is inclusive of the earnings of regular residents irrespective of their place of income. On the contrary, the earnings under domestic income will have to be necessarily generated within a country’s domestic territory.

Few Instances are Mentioned Below 

• For a salary that is earned by an Indian employee engaged in a Malaysian consulate in India, the income will be considered as national income considering he or she is an Indian resident. However, the same shall not fall under domestic income given that the Malaysian consulate is not a part of Indian domestic territory.

• In the instance of profits that are earned by a foreign bank branch in India will be covered under domestic income as those are generated within the domestic territory. However, on account of the factor income being paid overseas, it will not fall under national income.

Now Let us Find out What is the Difference Between GDP and GNP

What is GDP?

The gross domestic product or GDP allows the measurement of the economy size by considering the total amount of services and goods that are produced within a country’s territory within a specific financial year. 

It may consider the newly-produced services and goods as well only when it is generated within country borders.

The GDP is Calculated in the Following Way

What is GNP?

The gross national product or GNP is the aggregated value of all the goods and services which are produced by the country’s residents within a particular financial year. 

GNP categorically excludes the income which is generated by foreigners who are only residing within the territory of the country. 

The GNP is Calculated as -

GNP Vs GDP

The GDP and GNP differences can be understood from the following points. 

To find out more about GDP and GNP, you can refer to the online materials on our website. Also, install Vedantu’s app to start learning from anywhere.

Overview of the GDP and GNP

As said above both the GPD, that is to say, Gross Domestic Product, and GNP, which means Gross National Product. Both of these concepts are related to the National income and hence the students need to know about the national income.

In simple language, the value that the country produces in a form of goods and services in one financial year is called National Income, that is to say, it is the total outcome of all the economic activities of the nation combined in a particular financial year. For example, the revenue that a company generates in a given financial year, the revenue collected in a form of tax, and all the other such incomes that occurred in a year are all included in a national income.

On the other hand, there is a Domestic income. To explain the domestic income in a simple term it means all the factors that help in generating the income in a particular financial year, and all these factors must of the country itself. Just like the National income, the domestic income also gets calculated for a particular financial year.

If you wish to know more about the GPD that is to say gross domestic product you may find it on Vedantu.

Benefits of Having the Difference Between the National Income and Domestic Income

National income and Domestic income are two of the most important phrases used in the field of commerce and the field of economics as well. And more often than not students find it confusing. Because the kind of sound is similar, and even though they cannot be used interchangeably, students do the mistake of using them in such a manner.

To avoid this mistake, the best way is to understand the defaunation of it and of course learning the meaning of both the terms, that is to say, National Income and Domestic Income. But even after that, there are chances that students may use it interchangeably. And hence Vedantu provides the difference between the same in such a manner that it becomes extremely easy for the students to understand it. But even more importantly it helps the students in remembering the same for the exam.

Moreover, Vedantu provides this complete information free of cost and hence all the students of the commerce can have the benefit from it.