Different concepts of National income GDP,NNP,DI,PI, PCI per capita income, gross domestic income

Gross Domestic Product (GDP)

The concept of Gross Domestic product differs from gross national product only in one respect. Adjustment of net income from abroad with gross national product gives us gross domestic product Gross domestic product and Gross national product in closed economics are the same? In some countries like Saudi Arabia, Venezuela there exist wide difference between GDP and GNP. Foreign companies have made massive investments in these countries and returns on those investments are sizeable.

 GDP = P (Q) + P (S)

Or GDP = GNP - Net income earned from abroad.

Gross National Product (GNP)

Gross National Product is defined as the gross value of the final products and services produced by the whole economy during a year including net income earned abroad.

GNP = P (Q) + P (S) + net factor income from abroad (NFIA)

Or,     GNP = GDP + (X-M)

Where,

   P = Market price

   Q = Total output

   S = Services

   X = Export earnings

   M = Import expenses

It is important to three things in connection with GNP.

(a)      GNP Measures the gross value of goods and services in terms of money.

(b)      GNP refers to the gross value of all final products produced by the whole economy during a year.

          GNP does not include non-productive transactions.

Net National Product (NNP)

Productive capacity in most cases involves depreciation of fixed capital. For finding out the actual amount of production in a country, the amount of depreciation has been deducted from is gross national product. The amount of production that is available in a country for consumption, investment and government spending can be found out only after deducting the amount of deprecation from its gross national product. Met national product of a country is a more accurate measure of the output level achieved in the country. If a country for in stance uses its field capital more intensively, it can raise its gross national product considerably. However, these efforts will result in heavy capital depreciation on account of which net national product will not rise as fast as gross national product Net national product is a better index of growth. But even the figures of NNP alone do not tell us firmly whether an economy is recording growth or not. For assessing the growth performance of an economy one should see rate of increase in net national product in relation to the rate of growth of population.

NNP= GNP-Depreciation

Or,     NNP = Net domestic product +(X-M)

NNP is called the national income at market prices, because, it is expressed in market price.

Where,

Depreciation = Capital consumption allowance/wear and tear cost of assets.

National Income or Net national product at factor cost (NI or NNP at FC)

National income is the result of all the factors of production in the process of production. If the reward of all the factors of production is added the total amount is knows as National income at factor lost. In this total income the transfer payment made to factors of production is not included as it is not a payment for work. Thus, the national income at factor cost includes.

National income at factor cost = Wages + Rent + Interest + Profits Transfer Payment.

          National income at factor lost reflects the distributive aspect of NI.

Or,     NI or NNP at FC = NNP at MP – Net Indirect taxes.

Personal Income (PI)

Personal income is the component of the net national product, which goes to the households, and the productive activity is carried out through joint efforts of these factors. Yet the whole of net National income is not distributed among them. A part goes to government as corporate profits, another part is retained by corporate enterprises as undistributed profits and yet another part is paid out as social security contribution. The households get the transfer payment from the Government, which adds to their personal income in short,

Personal income = National income - corporate taxes - undistributed profits - social security contribution + transfer payments.

Disposable Income (DI)

On excluding the amount of direct taxes from the personal income of a country one gets its disposable personal income symbolically. It can be stated as.

          Disposable income = personal income - personal taxes (Direct taxes), fines, etc.

Or,     DI = consumption + saving

The concept of disposable income is very useful in computing the real purchasing power of the country. It also gives us information regarding the personal consumption, pattern. It refers to that part of the personal income, which is actually available to the households.

Per Capita Income (PCI)

It is the income of an individual for a year. It is worked out by dividing the national income with the total population of the country. Income per head, normally defined as the national income divided by the total population.

Per capital income (PCI) = National income of the given year/No of Population of the given yeart