How to Calculate Gross National Income
A country’s total value of all goods and services produced, as well as its domestic and international sources of income, must be determined in order to compute the gross national income (GNI). Sources for this information include international organizations, government statistics offices, and other organizations.
The steps that follow can be used to calculate GNI if you have the necessary data:
- Calculate the country’s gross domestic product (GDP). The GDP of a country is used to determine the total value of all products and services produced within its borders.
- Identify the net foreign income. This is the difference between the income that domestic residents receive from foreign sources (such as foreign investments or profits created by domestic businesses) and the income that foreign residents receive from domestic sources (such as profits earned by foreign companies operating in the country).
- To calculate the GNI, add the GDP and net income from other countries.
For instance, a country’s GNI would be $1,100 billion if its GDP was $1,000 billion and its net foreign income was $100 billion.
There are other ways to determine GNI, including the Atlas method, the World Bank technique, and the IMF method. The individual data sources and calculations used will determine the exact methodology.
What Is Gross National Income (GNI)? Definition and Examples
A country’s economic production is measured by its gross national income (GNI), which is calculated by adding the values of all the goods and services it provides, including both domestic and international sources of revenue. Gross domestic product (GDP), which measures a nation’s internal economic output, and GNI are related concepts. GNI, however, takes into account revenue from international sources, including overseas earnings made by domestic businesses or foreign investments.
GNI is often used to measure a nation’s economic progress and level of life as well as to compare the financial health of various nations. Additionally, the World Bank and other international organizations use it to divide nations into income categories according to the level of their economic growth.
It can be calculated using a number of different methodologies, such as the Atlas, World Bank, and IMF approaches. The Atlas technique, which is based on the country’s currency’s market exchange rates, is the one that is most frequently utilized. Purchasing power parity (PPP) exchange rates, which account for regional variations in the cost of living, are used in both the World Bank and the IMF methods.