Although they measure many elements of economic activity, gross national income (GNI) and gross domestic product (GDP) are significant economic measurements that measure a nation’s economic success.
- The entire worth of all products and services produced inside a nation’s boundaries over a given time period, usually a year, is represented by the GDP. It does not include the revenue that citizens of the nation receive from their investments abroad, but it does include the products of multinational businesses that are based here. GDP is a key indicator of how productive a nation is and economic condition and is frequently used for assessing the fiscal health of other nations.
- Conversely, gross national income (GNI) is the sum of GDP and net income from overseas sources, which is the difference between the amount of money citizens receive from their foreign investments and the amount they receive from domestic ones. Essentially, GNI offers an additional perspective by taking into account all income received by citizens of a nation, regardless of whether that income is earned domestically or abroad.
- The differentiation between GDP and GNI becomes especially crucial for nations that receive sizable amounts of transfers or contributions from abroad. For instance, a nation may have a higher GNI than GDP due to significant foreign investments or monetary transfers from its residents who work abroad. This is because the higher income from outside sources is reflected in the GNI. In contrast, because revenues are sent to investors from abroad, nations with sizable foreign-owned companies operating inside their borders may have larger GDPs than GNIs.
In conclusion, GNI provides a more complete view of a country’s economic health than GDP since it takes into account all income received by its citizens, whereas GDP concentrates on domestic production.
