1.1 Gross National Product (GNP)
Gross National Product (GNP) is a
measure of the market value of all final economic goods and services, gross of
depreciation, produced within the
domestic territory of a country by normal residents during an accounting year including net factor incomes from abroad. Gross
National Product (GNP) is evaluated at market prices and therefore it is in fact Gross National Product at market prices (GNP MP).
NFIA is the difference between the aggregate amount
that a country's
citizens and companies earn
abroad, and
the aggregate amount that foreign citizens and overseas
companies
earn in that country.
If Net Factor
Income from Abroad is positive, then GNP MP would
be
greater than GDP MP.
GNP MP =
GDP MP + Net Factor Income from Abroad
GDP MP = GNP MP
– Net Factor Income from Abroad
NFIA is the difference between the aggregate amount
that a country's
citizens and companies earn
abroad,
and the aggregate amount that foreign citizens and
overseas companies
earn in that country.
If Net Factor
Income from Abroad is positive, then GNP MP would
be
greater than GDP MP.
You might have noticed that the distinction between ‘national’ and ‘domestic’ is net factor income from abroad.
The two concepts
GDP and GNP
differ in
their
treatment of international
transactions. The term ‘national’ refers to normal residents of a
country who may be within or outside the domestic territory of a
country and is a broader concept compared to the term ‘domestic’. For example, GNP includes
earnings of Indian corporations overseas and
Indian residents working overseas; but
GDP does not include these. In other words, GDP excludes net factor income from abroad. Conversely, GDP includes earnings from
current production in India that accrue to foreign residents or foreign-owned
firms; GNP excludes those
items. For instance, profits earned
in India by X Company,
a foreign-owned firm, would
be included in GDP but not in
GNP. Similarly, profits earned by Company Y, an Indian company in UK would be
excluded from GDP, but included in GNP.
1.1 Net Domestic
Product at market prices (NDP MP)
Net domestic product at market prices (NDP MP) is a measure of the market value of all final economic goods and services, produced within the domestic territory of a country by its normal residents and non residents during an accounting year less depreciation. The portion of the capital stock used up in the process of production or depreciation must be subtracted from final sales because depreciation represents capital consumption and therefore a cost of production.
NDP MP = GDP MP – Depreciation
NDP MP = NNP MP – Net Factor Income from Abroad
As you are aware, the basis of distinction between ‘gross
’ and ‘net’
is depreciation or consumption of fixed
capital.
Net National Product at Market Prices (NNP MP)
Net National
Product at Market Prices (NNP MP) is a measure of the
market value of all final economic goods and services, produced by
normal residents within the domestic territory of a country including Net
Factor Income from Abroad during an accounting year excluding depreciation.
NNP MP = GNP MP
– Depreciation
NNP MP = NDP MP + Net Factor
Income from Abroad
NNP MP = GDP MP + Net
Factor Income from Abroad – Depreciation
Gross Domestic
Product at Factor Cost (GDPFC)
The production
and income approach (which we will discuss later in this unit) measure the
domestic product as the cost paid to the factors of production. Therefore, it
is known as ‘domestic product at factor cost’. GDP at factor cost is called so
because it represents the total cost of factors viz. labor, capital and
entrepreneurship.
At this stage,
we need to clearly understand the difference between the concepts: ‘market
price’ and ‘factor cost.’ In addition to factor cost, the market value of the
goods and services will include indirect taxes which are:
* product
taxes like excise duties, customs, sales tax, service tax etc., levied by
the government on goods and services,
and
* taxes on production, such as, factory license fee, taxes to be paid to
the local authorities, pollution tax
etc. which are unrelated to the
quantum of production.
You might have noticed that the government
gives subsidy to many goods and services.
The
market price will be lower by
the amount
of
subsidies on products and production which
the
government pays to the producer. Hence
,
the market value of final expenditure would
exceed the total obtained at factor cost by the
amount of product
and production taxes
reduced
by the value of similar kinds of
subsidies. Direct taxes do not have the same
effect
since they do not impinge
directly on
transactions but are levied directly on the
incomes. For example if the factor cost of a
unit of good X is ` 50/,
indirect taxes amount
to ` 15/per unit and the
government gives a
subsidy of ` 10/per unit, then market
price
will be ` 55/-
Thus, we find
that the basis of distinction
between
market price and factor cost is net
indirect taxes (i.e., Indirect taxes - Subsidies)
Market Price =
Factor Cost + Net Indirect Taxes
=
Factor Cost + Indirect Taxes – Subsidies
Factor Cost =
Market Price - Net Indirect Taxes
=
Market Price - Indirect Taxes + Subsidies
Gross Domestic Product at
Factor Cost (GDPFC)
= GDP MP –
Indirect Taxes + Subsidies
= Compensation
of employees
+
Operating Surplus (rent + interest+ profit)
+ Mixed Income of Self- employed
+ Depreciation
No comments:
Post a Comment