GDP vs GNI

What is Difference Between GNI and GDP?


The term Gross National Income (GNI) is widely used against the Gross Domestic Product (GDP) when the government implements Economic Transformation Programme (ETP) since 2010. So, what is the differences between the two terms?

Read this article to find the answer!

Gross Domestic Product (GDP) and Gross National Income (GNI) are the economic terms that are used to measure a nation's income.

Gross Domestic Product (GDP)

GDP is the market value of all final goods and services produced within a country in a given period, e.g: monthly, quarterly or yearly. GDP can be determined in 3 ways--in principle, should give the same result. They are the product approach, the income approach, and the expenditure approach. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures.

Gross Domestic Product (GDP) is comprised of three components, there are:

GDP =Personal Consumption (C) + Private Investment (I) + Government Expenditures (G) + Net Exports (Exports-Imports)

Gross National Income (GNI)

GNI comprises the total value produced within a country (i.e. its GDP, together with its income received from other countries (basically interest and dividends ), less similar payments made to other countries.The GNI consists of the personal consumption expenditures (C), private investment, government expenditures (G), net income received from other countries, and exports of goods and services, after deducting imports of goods and services.

In a formula term:

GNI = GDP + (Income received from other countries less Income payments to other countries)

For example, the profits of a Malaysian-owned company operating in Indonesia will count towards Malaysia GNI and Indonesia GDP, but will not count towards Indonesia GNI or Malaysia GDP.

What is the main difference between Gross Domestic Product (GDP) and Gross National Income (GNI)?

One of the main differences between GDP and GDI, is that the GDP is based on location, while GNI is based on ownership. It can also be said that GDP is the value produced within a country’s borders, whereas the GNI is the value produced by all the citizens.

Since Economic Transformation Programme (ETP) deals with the foreign investment in Malaysia and the Malaysian investment abroad, it is meaningful to use GNI instead of GDP to measure the achievement of ETP in relation to achieve high-income nation.  The keyword here is "income".

(Note: This is a simplified article for the general readers to understand the basic concept of GDP and GNI.)

source: http://www.malaysian-economy.com/2011/03/what-is-difference-between-gni-and-gdp.html