National Income & Related Concepts
Delhi Police Exams - GK Section
Introduction
National Income is the total monetary value of all final goods and services produced within and outside a country in a given financial year. It reflects a nation’s economic health, living standards, and development progress.
Memory Trick: “National Income = Nation’s Total Output in Rupees.”
Basic Concepts of National Income
| Term | Full Form | Definition | Example / Formula |
|---|---|---|---|
| GDP | Gross Domestic Product | Total value of all final goods & services produced within a country | GDP = C + I + G + (X – M) |
| GNP | Gross National Product | GDP + Net Income from abroad | GNP = GDP + (Income earned abroad – Income paid to foreigners) |
| NDP | Net Domestic Product | GDP – Depreciation | NDP = GDP – Depreciation |
| NNP | Net National Product | GNP – Depreciation | NNP = GNP – Depreciation |
| National Income (at factor cost) | NNP at Factor Cost | NNP – Indirect taxes + Subsidies | National Income = NNP at Factor Cost |
Trick to Remember: GDP + Abroad = GNP → Minus Depreciation = NNP.
GDP (Gross Domestic Product)
- Measures value of all goods and services produced within India
- Includes income of foreigners in India, excludes Indians abroad
- Represents domestic strength of an economy
GDP of India (2024–25 est.): Around $3.9 trillion (5th largest globally)
Trick: GDP = Goods Done in Place.
GNP (Gross National Product)
- Measures total income earned by Indians, both in India and abroad
- Excludes income of foreigners within India
Trick: GNP = GDP + NRIA (Non-Resident Indian’s Abroad Income).
NDP (Net Domestic Product)
- GDP after deducting depreciation (wear and tear of machinery)
- Shows real production capacity within the country
Trick: NDP = GDP minus Damage.
NNP (Net National Product)
- GNP minus depreciation
- Considered true measure of national output
Trick: NNP = GNP – Depreciation → Nation’s Net Produce.
Per Capita Income & Disposable Income
| Term | Meaning / Formula | Indicates |
|---|---|---|
| Per Capita Income (PCI) | National Income ÷ Population | Average income per person |
| Disposable Income | Personal Income – Direct Taxes | Income available for spending/saving |
Trick: Per Capita = Per Head | Disposable = After Tax.
India’s PCI (2024–25): Around ₹1.72 lakh/year (approx. $2,000)
Methods of Measuring National Income
| Method | Basis of Measurement | Formula / Example |
|---|---|---|
| 1. Product (Output) Method | Value of goods & services produced | GDP = Σ (Output × Price) |
| 2. Income Method | Total income earned by factors of production | National Income = Rent + Wages + Interest + Profit |
| 3. Expenditure Method | Total expenditure on final goods & services | GDP = C + I + G + (X – M) |
Trick: P-I-E = Product, Income, Expenditure – 3 Ways to Bake the GDP Pie!
If Total output = ₹50 lakh
Wages = ₹20 lakh
Profit = ₹10 lakh
Rent = ₹5 lakh
Interest = ₹5 lakh
→ National Income = ₹40 lakh (Income Method)
Real vs Nominal GDP
| Type | Meaning | Formula / Basis | Example |
|---|---|---|---|
| Nominal GDP | GDP at current prices | Includes inflation | Prices of today |
| Real GDP | GDP at constant prices | Adjusted for inflation | Prices of base year |
Trick: Nominal = Now | Real = Really adjusted.
If Nominal GDP = ₹1,000 Cr and Inflation = 10%
→ Real GDP = ₹900 Cr (approx.)
India’s Current GDP Rank & Growth Rate (2025)
| Country | GDP (Nominal, 2025 est.) | Rank |
|---|---|---|
| USA | $28 trillion | 1 |
| China | $18 trillion | 2 |
| Japan | $4.4 trillion | 3 |
| Germany | $4.3 trillion | 4 |
| India | $3.9 trillion | 5th |
India’s Growth Rate (2024–25): ~6.8% (one of the fastest globally)
Source: IMF World Economic Outlook 2025
Trick: U-C-J-G-I → USA, China, Japan, Germany, India (Top 5).
PYQs (Delhi Police, SSC & State Exams)
Which of the following represents the total value of goods and services produced within a country?
A) GNP B) GDP C) NNP D) PCI
PYQ No.1
Show Answer
B) GDP
GNP is equal to —
A) GDP + Depreciation B) GDP + Net Income from Abroad C) GDP – Depreciation D) NDP + Depreciation
PYQ No.2
Show Answer
B) GDP + Net Income from Abroad
The true measure of national income is —
A) GDP B) NDP C) NNP at Factor Cost D) GNP
PYQ No.3
Show Answer
C) NNP at Factor Cost
The method of measuring national income that adds rent, wages, interest, and profit is —
A) Output Method B) Income Method C) Expenditure Method D) Value Method
PYQ No.4
Show Answer
B) Income Method
GDP calculated at current prices is called —
A) Real GDP B) Nominal GDP C) Potential GDP D) Constant GDP
PYQ No.5
Show Answer
B) Nominal GDP
Which is deducted from GNP to get NNP?
A) Indirect Taxes B) Depreciation C) Direct Taxes D) Subsidies
PYQ No.6
Show Answer
B) Depreciation
The Per Capita Income is calculated as —
A) GDP ÷ Population B) NDP ÷ Population C) National Income ÷ Population D) GNP ÷ Population
PYQ No.7
Show Answer
C) National Income ÷ Population
Which of the following is NOT included in national income?
A) Wages B) Rent C) Sale of old car D) Interest
PYQ No.8
Show Answer
C) Sale of old car
India’s economy is ranked globally (2025 est.) as —
A) 3rd B) 4th C) 5th D) 6th
PYQ No.9
Show Answer
C) 5th
The difference between nominal GDP and real GDP is due to —
A) Employment rate B) Inflation C) Population D) Imports
PYQ No.10
Show Answer
B) Inflation
Quick Concept Recap
| Concept | Definition / Formula | Core Idea |
|---|---|---|
| GDP | Within India | Domestic Output |
| GNP | GDP + Net Income from Abroad | National Output |
| NDP | GDP – Depreciation | Real Domestic Production |
| NNP | GNP – Depreciation | National Income |
| PCI | NI ÷ Population | Average income |
| Real GDP | Adjusted for inflation | Real growth |
| Nominal GDP | Current prices | Apparent growth |
Mnemonic: G + A – D = True NNP → GDP + Abroad – Depreciation = Real National Income.
Final Concept Recap
- India = 5th largest GDP (Nominal ~$3.9T)
- GDP → Domestic | GNP → National | NNP → Net Product
- 3 Measurement Methods → Product, Income, Expenditure
- Per Capita Income shows living standards
- Nominal ≠ Real GDP (inflation-adjusted difference)
One-Line Memory: “GDP shows what we produce, GNP shows what we earn, and PCI shows what we live on.”
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