Gross National Product
Gross National Product (GNP) is the total market value of all goods and services produced by a country's residents and businesses — regardless of where they are physically located — over a given period, and equals GDP plus net factor income from abroad.
The distinction between Gross Domestic Product (GDP) and Gross National Product (GNP) lay in the treatment of factor income flows across national borders. GDP measured output produced within a country's geographic territory, irrespective of whether the producers were domestic or foreign. GNP, by contrast, measured output attributable to a country's residents and nationals, irrespective of where that output was physically produced.
The relationship between the two was: GNP = GDP + Net Factor Income from Abroad (NFIA). NFIA represented the difference between factor income received by Indian residents from abroad (wages remitted by Indian workers overseas, dividends received by Indian companies from foreign subsidiaries, interest earned on foreign assets) and factor income paid by India to foreign residents (remittances paid to foreign workers in India, dividends repatriated by multinational subsidiaries, interest paid on external debt).
For India, the NFIA had historically been negative on the financial income side — India paid more in interest on external debt and repatriated dividends to foreign MNCs than it received in investment income. However, private transfer receipts — primarily workers' remittances — were substantial. India was consistently among the world's largest recipients of personal remittances, with inflows exceeding USD 100 billion annually by the mid-2020s, driven by the large Indian diaspora in the Gulf countries, North America, and the United Kingdom. These remittances were counted in the current account as private transfers rather than factor income, though their economic significance was enormous.
In practice, GDP had become the preferred measure of economic activity globally, including in India, because it was easier to measure (it only required tracking output within borders) and was more relevant for domestic policy purposes such as taxation and public services. GNP was more relevant for assessing the welfare of a country's nationals, because it included income earned abroad but excluded income earned domestically by foreign nationals.
Gross National Income (GNI) was the modern successor to GNP in national accounts terminology. The World Bank used GNI per capita as its primary measure for classifying countries into income groups (low, lower-middle, upper-middle, and high income). As of 2024, India was classified as a lower-middle-income country with a GNI per capita of approximately USD 2,500 at Atlas method prices — a methodology designed to smooth out exchange rate fluctuations in cross-country comparisons.
For investors analysing India's external economic position, tracking the GNP-GDP gap — specifically the evolution of factor payments abroad relative to factor income receipts — provided insights into the long-term sustainability of India's external sector. A widening gap due to rising repatriated profits by foreign MNCs operating in India could create subtle but persistent current account pressures.