How is gross national income determined?

To determine the economic stability of the state, various concepts are used. All of them help to identify changes and economic growth, as well as suggest further development options. This becomes a kind of characteristic of the country in the international arena, helping to build relations with other countries.

So, what is included in the concept of "gross national income"? This is nothing but the sum of the total primary income that citizens of a particular country received over a certain period of time. Moreover, this calculation applies to both residents within the country and those who are abroad, but have citizenship. In the latter case, only that part of the income that went to foreign states is not considered.

Why do you need such a calculation?

State revenues depend not only on the volume of production within the country, on manufactured products and services offered, etc. It is necessary to take into account the total amount of funds earned by the inhabitants of the country. And in this case, it is necessary to take into account the amount of funds received from abroad, as well as that part of the funds, which in turn was transferred to other states.

Gross national income depends on GDP (gross domestic product). But there are differences between them. They are expressed primarily in the fact that gross domestic product (GDP) reflects primarily only the volume of production, its development, as well as various services that are produced or carried out by residents (residents) of a particular country.

While gross national income allows you to determine the total income of residents of the country, and, consequently, of the whole state as a whole. This is the total cash flow that residents receive. Gross national income (GNI) is calculated as follows: to the gross domestic product (GDP) is added the difference between income received from abroad and paid to other countries.

What is the difference between GDP and GNI?

  In this situation, it is not always clear what the difference is between these two concepts, and most importantly, it is not clear why they are separated, because they are much similar to each other.

Nevertheless, there is a difference, gross domestic product is what determines the goods and services produced within one country, i.e. it is expressed in the total value of all these goods and services. While gross income shows the total amount of money that the citizens of this country have earned. Moreover, they could work not only in their own country. Thus, gross national income includes income of residents from participation in the GDP of other countries.

In fact, this means that many companies can provide their services abroad. There may be established any production. Profit will be distributed between countries, but some part will go to the country to which the company belongs, etc.

By the way, GNI is often called the gross national product (GNP). This is one and the same, until 1993, GNI was called a product and was calculated according to the same scheme. The changes were introduced due to the fact that GNP reflected only production indicators, while gross national income reflects the total national income of all sectors of the economy.

In relation to different countries of the world, GNI and GDP can be correlated differently. As a rule, in developed countries, national income is greater than GDP, since they can provide funds to developing countries, after which they receive interest for the resources provided and have a share of production.

In Russia, GNI is still below GDP. In addition, if you subtract from the GNI the use of fixed capital and depreciation costs, you can get net national income (NPI), which is also used in the description of the country's economy.


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