What is Gross National Income (GNI), and how is it different from Gross Domestic Product (GDP)?
The correct answer and explanation is :
Gross National Income (GNI) vs. Gross Domestic Product (GDP)
What is Gross National Income (GNI)?
Gross National Income (GNI) is the total monetary value of goods and services produced by a country’s residents, including income earned abroad. It accounts for GDP plus net income from foreign investments (such as remittances, dividends, and foreign business profits).
Difference Between GNI and GDP
- Definition
- GDP (Gross Domestic Product) measures the total value of all goods and services produced within a country’s borders, regardless of whether the income goes to residents or foreign entities.
- GNI includes GDP plus net foreign income (income earned by nationals abroad minus income earned by foreigners domestically).
- Scope
- GDP focuses on domestic production.
- GNI focuses on income received by a country’s residents, whether from within or outside the country.
- Use Cases
- GDP is used to measure a country’s economic activity and growth.
- GNI is useful for understanding the financial well-being of a nation’s citizens.
- Example
- If a U.S. company operates in India, its earnings contribute to India’s GDP but count as part of U.S. GNI since profits go to U.S. residents.
Why Does GNI Matter?
GNI provides a clearer picture of the actual income available to residents, which is crucial for assessing living standards, global financial contributions, and economic well-being. Developing countries often rely on GNI to track remittances and foreign aid.
