Difference Between GNI and GDP

Edited by Diffzy | Updated on: April 30, 2023

       

Difference Between GNI and GDP

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Introduction

GDP and GNI, differ in some aspects, while; both have some similarities too. This article is concerned with the rift between Gross domestic product and Gross national income. They both are relevant to the economic aspect.

GDP vs GNI 

There is not much difference between GDP and GNI but just a few. GDP stands for Gross Domestic Product; whereas GNI stands for Gross Domestic Income. Gross Domestic Income refers to the aggregate value of all the goods and services belonging to the normal residents residing within the domestic territory in the foreign territory; contrary to what GNI (Gross National Income) refers to, GDP (Gross Domestic Product) refers to the aggregate market value of all goods and services produced in the domestic territory of a nation, it does not include goods and services produced beyond the domestic territory of the nation.

The major difference between GNI (Gross National Income ) and GDP (Gross Domestic Product) is just the concept of NFIA, which is an abbreviation for Net Factor Income from Abroad. NFIA can be calculated easily. To calculate it we need to subtract the factor income abroad from factor income from abroad.

As per the formula, it is written as :

GDP = GNP - NFIA

Difference between GNI and GDP in Tabular Form

GNI   GDP
GNI is the total value of all the goods and services all over the world. GDP is the total value of all the goods and services confined to the domestic area.
GNI stands for Gross National Income. GDP stands for Gross Domestic Product.
GNI = NFIA + GDP GDP = GNP - NFIA
GNI facilitates the comparison of gross products in a foreign country also. GNP compares the distribution of income within a country.

What is GNI (Gross National Income)?

GNI (Gross National Income) was earlier known as GNP (Gross National Product). So, Gross National Product is the total value of all the goods and services belonging to normal residents, including Gross Domestic Product (GDP), as well as out of the domestic territory or in the foreign territory. GNI (Gross National Income ) contributes the largest to Europe.

Gross National Income is similar to Gross Domestic Product, as; the amount of Gross National Income is equal to Gross Domestic product, including the income generated overseas or out of the country.

GNI (Gross National In is not merely confined to domestic areas or within one country. It is spread across vast areas around the world. GNI implies allocated output based on the area of ownership. In general, it calculates the income by the area of ownership and residence.

GNI (Gross National Income ) does not differentiate between qualitative advancements in the state of the specialized technical arts, like increasing the speed of computers, and quantitative enhancement in goods, like the number of computers that are being processed.

GNI (Gross National Income ) was the major source of calculating income in America till 1991, and then it switched to GDP ( Gross Domestic Product). It plays a vital role in the financial development of a country.

GNI = GDP + NFIA

What is GDP?

GDP (Gross Domestic Product) is the total market value of all goods and services produced in the domestic territory of a country, it is not concerned with the goods and products generated outside the nation (foreign country). It is an economic growth rate of a country measured accurately by the financial workers.

It is generally calculated per year. In the U.S.A ( United States of America ), it is calculated quarterly. There are three methods of calculating GDP ( Gross Domestic Product ), and they are :

  • It can be calculated using expenditures.
  • It is calculated using production.
  • It can either be calculated using income.

It is a primary factor to counsel the ones who create policy, the ones who invest, and many businesses also. GDP (Gross Domestic Product) includes the economic rate of all private sectors, public sectors, government sectors, and many more except foreign sectors. It remains confined to the borders of one country or a nation merely. It has nothing to do with foreign trade, unlike GNI ( Gross Domestic Income)

The GDP (Gross Domestic Product ) of a country increases when the total amount of goods and services sold by the domestic producers in a foreign country increases the total amount of foreign goods and services that domestic customers buy, whereas it decreases when the amount spent by domestic consumers on foreign products increases and becomes greater than the total amount of what domestic producers are capable of selling in other foreign countries.

GDP = GNP - NFIA

Main Difference between GDP and GNI in Points

Nature of concept - GDP ( Gross Domestic Product) is a territorial concept as it includes the value of final goods and services produced within the domestic territory of a country, including depreciation and Net Indirect Tax (NIT); whereas GNI (Gross National Income) is a national concept as it includes the value of final goods and services produced in the entire world including depreciation and Net Indirect Tax (NIT).

Category of Producers - GDP (Gross Domestic Product ) considers all producers within the domestic territory of a country; while GNI (Gross National Income ) considers all normal producers residents of the country.

NFIA - GDP ( Gross Domestic Product ) does not include NFIA; whereas GNI (Gross National Income ) includes NFIA.

For example - GDP = GNI - NFIA

                       GNI = GDP+NFIA

Embassy - The products included in GDP (Gross Domestic Product) are goods produced in India, income received from the Japanese embassy in India, whereas the products included in GNI ( Gross National Income) are the goods produced by normal residents all over the world, income received by the Indian embassy in Japan, America or any other foreign country including depreciation.

Conclusion

Both the concepts of GDP (Gross Domestic Product) and GNI (Gross National Income) are regarded to be equally important concepts taken into consideration by economists. These concepts even establish solemn comparison of the income distribution.

Both the GDP ( Gross Domestic Product) and GNI (Gross National Income) include depreciation, which means the declining cost of durable goods due to expanse of time, expected obsolescence, or technological up-gradation. GDP ( Gross Domestic Product) and GNI (Gross National Income) do not exclude depreciation, they do not provide the actual addition made to investments, and they provide the total allowances in investments, including depreciation. Therefore, it indicates that they have a few similarities too.

Both these concepts play a vital role in the growth rate of a country's economic development. These facilitate and support all the sectors of an economy and provide a monetary unit of comparison to economists.


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"Difference Between GNI and GDP." Diffzy.com, 2024. Sat. 13 Apr. 2024. <https://www.diffzy.com/article/difference-between-gni-and-gdp-1064>.



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