How is gross national income determined?

Various concepts are used to determine the economic stability of the state. They all help to determine the changes and growth of the economy, as well as to suggest further options for development. This becomes a kind of characteristic of the country in the international arena, helping to establish relations with other countries.

So, what is included in the concept of "gross national income"? This is nothing more than the sum of the total primary incomes that citizens of a particular country have received over a certain period of time. And this calculation applies both to residents within the country, and those who are abroad, but who have citizenship. In the latter case, only that part of the income that went to foreign countries is not considered.

Why do we need such a calculation?

State revenues depend not only on the volume of production within the country, on products and services offered, etc. It is necessary to take into account the total amount of funds earned by the inhabitants of the country. And in this case it is necessary to take into account the volume of funds received from abroad, as well as the part of the funds, which in turn was transferred to other states.

Gross national income depends on GDP (gross domestic product). But there are differences between them. They are expressed primarily in the fact that the gross domestic product (GDP) primarily reflects only the volume of production, its development, and also includes various services that are produced or carried out by residents (residents) of a particular country.

Whereas the gross national income makes it possible to determine the total amount of incomes of the inhabitants of the country, and, consequently, of the entire state as a whole. This is the total flow of money that people in the country receive. Gross national income (GNI) is calculated as follows: the difference between income received from abroad and paid to other countries is added to the gross domestic product (GDP) .

What is the difference between GDP and GNI?

  In this situation it is not always clear what is the difference between these two concepts, and most importantly it is not clear why they are shared, because they are in many respects similar.

Nevertheless, there is a difference, the gross domestic product is what determines the goods and services produced within one country, i.e. It is expressed in the total value of all these goods and services. While gross income shows the total amount of money that citizens of this country earned. At the same time, they could work not only in their own country. Thus, the gross national income includes the residents' income from participation in the GDP of other countries.

In fact, this means that many companies can provide their services abroad. There can be established any production. The profit will be distributed among the countries, but some part will go to the country to which the company belongs, etc.

By the way, often GNI is called the gross national product (GNP). This is the same, until 1993 GNI was called a product and was calculated according to the same scheme. The changes were made due to the fact that the GNP only reflected production figures, while the gross national income reflects the total national income of all sectors of the economy.

For various countries of the world GNI and GDP can be related in different ways. Generally, in developed countries, the national income is greater than GDP, since they can provide funds to developing countries, after which they receive interest for the resources provided and have a part from production.

In Russia GNI is still below GDP. In addition, if you subtract from GNI the use of fixed capital and the cost of depreciation, that you can get a net national income (NPD), which is also used in describing the country's economy.