Difference Between GDP and GNP

In the present day world, it is not uncommon to stumble across these two words, GDP and GNP often. GDP which stands for Gross Domestic Product.


Finance Quiz

Test your knowledge about topics related to finance

1 / 10

Which one is/are financial assets?

2 / 10

The shares of well-established, financially strong and big companies having remarkable Record of dividends and earnings are known as:

3 / 10

Earnings per share show investors the __________ earned per outstanding share of stock.

4 / 10

What is the difference between stocks and bonds?

5 / 10

Which is not a cash activity listed on the cash flow statement?

6 / 10

What is the difference between saving and investing?

7 / 10

What is the yield curve?

8 / 10

What is the definition of a liquid asset?

9 / 10

What is a diversified portfolio?

10 / 10

An 'Overdraft' is  where a business is permitted to overspend on its bank account up to an agreed limit.

Your score is



The difference between GDP and GNP is quite easy to comprehend as GDP is measured within a country’s defined boundary whereas GNP is calculated taking into report both domestic and foreign monetary activities. These two phrases have some other little differences too based on how foreign and non-residential citizen’s income is evaluated.

GDP vs GNP 1

Want to save this article for later? Click the heart in the bottom right corner to save to your own articles box!

GDP is the metric that’s most commonly used to measure the economic growth and present size of a country’s economy. It is the total monetary value of the finished commodities, goods, services, produced within the boundaries of a nation (domestically) over a specific time phase, mostly it’s measured yearly.

GNP, on the other hand, is the procedure to compute the monetary growth of a country that’s made by all of its citizens residing both within the country and outside the country. For instance, an Indian resident working in the United States can contribute to the country’s GNP if he has the citizenship of India.

Comparison Table

Parameters of differenceGross Domestic ProductGross National Product
Boundary It is measured within the boundary of a countryIt is measured both within and outside the boundaries of a country
Non-residential citizensNon-residential citizens contribute to a country’s gross domestic product Non-residential citizens will not contribute to a country’s Gross National Product unless they have dual citizenship
Foreign citizensForeign citizens income is included as a part of Gross Domestic Product if they work within the country.Foreign citizens income is not included in a countries GNP.
OwnershipCompanies\factories within a country  boundary contribute to gross national product irrespective of ownershipCompanies belonging to a particular country contributes to their Gross National product, irrespective of who works in it.
Formula of calculationGDP = consumption + investment+ spending by government + exports GNP = GDP + (money flow IN foreign countries – money going TO foreign countries)

What is GDP?

The GDP of a country is the consumption, investment, government spending and exports within a countries boundary. Non-residential citizens who send their money to their own country, contribute to the GDP of their country.

The rather simple method to calculate GDP is the sum of consumption, investment, spending by the government which also includes the other expenditures made by the government. It is one of the most important systems to calculate a country an economic activity, growth and also reflects the living standards of people of that very country.

Foreign citizens who own a company or their own industry within the territories of India also pay to the government is included in the country’s GDP. GDP is mainly of four varied types which include – Real GDP followed by nominal GDP, then comes actual GDP and finally possible GDP.

Taking a simple example, if a Miniso store is present within India, it contributes to India’s GDP while it pays taxes to the government. Also, Indian employees working in that store when spending the money inside the country contributes to GDP.


What is GNP?  

The term GNP implies the accumulated amount of consumption, along with investment, exports and expenditure of the government. This includes actions both within and outside of the border of a country.

The simple words GNP is the sum of GDP and the money flowing in another foreign country (belonging to this country,) and negating the money flow to a foreign country). GNP is mainly derived from the GDP.

Based on the formula we can say that the income of foreign residents isn’t included in the country’s GNP even if they invest it within that same country.  It becomes the GNP of the country they originally belong to.

Taking an example to explain this concept of GNP, if an Indian citizen lives in the United States and has citizenship of India, all earnings by him are included in the GNP of India.


Main Differences Between GDP and GNP

  1. The gross domestic product includes the economic values of all finished goods and services that are done within the boundary of the country.
  2. The income by non-residential citizens when sending their money into their own country promote the GDP growth of their own country. Whereas non-residential citizens do not contribute to the GNP of their own country.
  3. Foreign citizens who work in a company present in another country, contribute to the GDP of that country. however foreign citizens income isn’t considered while calculating GNP
  4. Industries, companies and factories present inside the country contribute to its GDP irrespective of ownership. Whereas industries, companies and factories owned by the citizens of a particular country contribute to its GDP, respective of its location.
  5. Gross Domestic Product is calculated using the formula –

GDP = consumption + investment+ spending by government + exports.  

Gross national product is measured by the formula – = GDP + (money flow IN foreign countries – money going TO foreign countries.

Difference Between GDP and GNP
  1. https://www.sciencedirect.com/science/article/pii/S0301421501000179
  2. https://www.researchgate.net/profile/Jannatul-Bristy/publication/314484207_GDP-GNP_Gap_Trade-Off-is_it_Significant_for_Economic_Performance_Review_of_World_Economies_Having_Both_Gaps/links/5d09b0f7a6fdcc35c1592fa7/GDP-GNP-Gap-Trade-Off-is-it-Significant-for-Economic-Performance-Review-of-World-Economies-Having-Both-Gaps.pdf
One request?

I’ve put so much effort writing this blog post to provide value to you. It’ll be very helpful for me, if you consider sharing it on social media or with your friends/family. SHARING IS ♥️

Leave a Comment

Your email address will not be published. Required fields are marked *