Performance of an economy is related to the level of production

(of goods and services) or total economic activity. Measures of

national income and output are used in economics to estimate
the total value of production in an economy.

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).

In India, the Central Statistical Organisation has been estimating

the national income.
A country’s economic performance has been measured by
indicators of national income such as GDP or GNP.

Further, measuring national income is essential for various

purposes that include

• Projection about the future course of the economy,

• Assisting government as the basis to design (or redesign)
suitable development policies,
• Helping firms in forecasting future demand for their products,
• Facilitating international comparison.
Definitions of National Income
National income is a measure of the total value of the goods
and services (output) produced by an economy over a period
of time (normally a year).

Alfred Marshal :
“The labour and capital of the country acting on its natural
resources produce annually a certain net aggregate of
commodities, material and immaterial, including services of
all kinds… This is the net annual income or revenue of the
country, or the national dividend.”

National Income Committee of India,:

“ National income estimate measures the volume of
commodities and services turned out during a given period
counted without duplication.”
Basic Concepts

Gross National Product

Gross National Product (GNP) is the total value of output
(goods and services) produced and income received in a
year by domestic residents of a country. It includes profits
earned from capital invested abroad.

Gross Domestic Product

Gross Domestic Product (GDP) is the total value of output
(goods and services) produced by the factors of production
located within the country’s boundary in a year. The factors
of production may be owned by
any one – citizens or foreigners.

GNP – Net income earned from abroad = GDP

Net National Product

Net National Product (NNP) is arrived at by making some

adjustment, with regard to depreciation, in GNP.
(Depreciation: The available plant and machinery (capital)
will wear and tear and get condemned. Such decline in
the capital assets due to wear and tear is measured as
‘capital depreciation’.)
GNP – Depreciation = NNP

Net Domestic Product

Net domestic product (NDP) is also arrived from GDP by

making adjustment with regard to depreciation in the same
way described above.
GDP – Depreciation = NDP