Answer :

National income refers to the amount of total income acquired by the country in one year. The main concepts of National Income are –

a. GNP – Gross National Product is the calculation based on the final goods and services produced in a country. Final products are those products which are made ready for its consumption. Example – shirt is the final product for consumption; cloth, thread, and buttons are used as raw material to produce these shirts. For calculating GNP, money of final products is taken into consideration. For example – the price of the raw material such as buttons and thread are included in the price of the shirt. GNP is calculated for a particular financial year. The financial year of India is from 1 April to 31 March.


b. GDP - Gross Domestic Product considers the domestic territory of a country. It helps us to evaluate the contribution of different sectors in an economy. It means GDP is the total money value of produced final goods and services within the domestic territory of a country during a financial year. To calculate the GDP, the income of the people working abroad and the profit of the institutions and firms located abroad will not be calculated. For example – if an Indian firm is located abroad then the profit of that firm will not be calculated to determine the GDP of India but to calculate the Gross National Product of India. Such incomes will be excluded to calculate the GDP of India.


c. Per capita income – Per capita income is calculated when we divide national income by population. Per capita income allows us to know about the economic position of a country and helps in comparison of it with other countries.


Per capita income = National Income ÷ Total population


d. NNP - when depreciation charges are subtracted from the Gross National Product, we get the Net National Product. It means –


Net National Product = Gross National Product - depreciation charges


Depreciation charges refer to the cost spent on repairing the deterioration caused to the machinery and other things with time. For calculating National Income depreciation charges have to be considered. Moreover, Net National Product is considered as national income.


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