What Is Gross National Income (GNI)?
Gross National Income (GNI) is the total income earned by a country’s residents and businesses in a given period, regardless of where that income is generated. It starts with Gross Domestic Product (GDP) — the market value of goods and services produced within national borders — and adjusts for net income flows between the country and the rest of the world (primarily compensation of employees and investment income). GNI therefore captures both domestic production and cross‑border income earned by residents.
Key takeaways
– GNI = GDP plus net primary income from abroad (income residents receive from foreign sources minus income paid to foreign residents).
– GNI is often preferred to GDP when international income flows (remittances, foreign investment income, repatriated profits) materially affect national income.
– Institutions such as the World Bank and the European Union use GNI (and GNI per capita) for classification and budget/contribution calculations.
– GNI can be higher or lower than GDP: higher when net income from abroad is positive (e.g., strong remittances or investment returns to residents), lower when multinational profits are repatriated to nonresidents.
In‑Depth look at GNI
Core concept
– Residence principle: GNI counts income by residents (households, businesses) based on where they usually reside, not on citizenship. If a resident earns income abroad and spends it in the home country, that income is part of GNI.
– Components typically included in net primary income from abroad: compensation of employees (wages paid across borders), investment income (interest, dividends, reinvested earnings on foreign direct investment), and sometimes foreign aid or transfers if included in broader income measures.
Formal (simplified) formula
– GNI = GDP + (primary income received from rest of world) − (primary income paid to rest of world)
(Primary income usually called “net primary income” or “net factor income” in national accounts.)
Comparing GNI with GDP and GNP: practical differences
– GDP (Gross Domestic Product): value of production within a country’s borders during a period, regardless of who owns the resources.
– GNI (Gross National Income): GDP plus income received by residents from abroad minus income paid to nonresidents. Reflects income available to residents.
– GNP (Gross National Product): historically similar to GNI; in modern national accounting GNI has largely replaced GNP, but many people use the terms interchangeably. The practical distinction is small: GNI is the UN/SNA/World Bank term, and GNP is an older term sometimes still used in textbooks.
Real‑world examples (illustrative)
– United States (2024, per cited sources): GDP ≈ $29.184 trillion; GNI ≈ $29.243 trillion → net income from abroad ≈ +$59 billion (a small positive adjustment).
– Bangladesh (2024, illustrative): GDP ≈ $450 billion; GNI ≈ $469.5 billion → net income from abroad ≈ +$19.5 billion (remittances and foreign inflows raise GNI above GDP).
– Ireland (2024, illustrative): GDP ≈ $577 billion; GNI ≈ $437 billion → net income from abroad ≈ −$140 billion (large negative adjustment because a substantial portion of profits booked in Ireland are attributable to foreign multinationals and repatriated to nonresidents).
Sources: Investopedia summary and World Bank data series for GNI/GDP.
When is GNI more useful than GDP?
– Countries with large remittance flows: GNI captures money sent home by migrants, which directly affects residents’ income and consumption capacity.
– Economies with substantial foreign investment / multinational profit repatriation: GDP may overstate the income accruing to residents if a large share of domestic production’s earnings goes to nonresident owners. GNI corrects for that.
– For international aid, country classification, and contribution formulas: World Bank uses GNI per capita to classify low/middle/high‑income economies; the EU uses GNI to calculate member‑state contributions.
– For assessing national welfare and the income available to residents (as opposed to total domestic production).
Limitations and caveats
– Still not a full welfare metric: GNI does not reflect income distribution, environmental depletion, unpaid household work, or informal economy size.
– Vulnerable to profit‑shifting and base‑erosion effects: tax optimization by multinationals can distort both GDP and GNI; some countries’ GNI can swing significantly due to accounting changes.
– Data and timing: cross‑border income flows are measured differently in national accounts and the balance of payments; revisions are common.
– Residence vs citizenship: GNI is based on resident status; wealthy citizens living abroad are not counted as domestic residents for GNI purposes.
How is GNI calculated — practical steps
For analysts or statisticians who need to compute or check GNI, here are concrete steps:
1. Obtain reliable GDP data for the period (nominal/current US$ or domestic currency).
– Source: national statistical office, IMF, or World Bank.
2. Collect primary income flows with the rest of the world:
– Primary income received by residents (credits): wages earned by resident workers abroad, dividends, interest, and reinvested earnings on residents’ foreign direct investment (FDI), and similar returns.
– Primary income paid to nonresidents (debits): wages paid to nonresident workers in the country, dividends and interest paid to foreign owners, repatriated FDI profits, etc.
– Sources: balance of payments (BOP) financial and current account datasets, central bank, IMF BOP statistics.
3. Calculate net primary income from abroad:
– Net primary income = primary income received − primary income paid.
4. Add any required tax/subsidy adjustments if needed to align conventions:
– In some presentations, product and import taxes not already in GDP are added; subsidies are subtracted. Most standard national‑accounts presentations use the GDP figure consistent with the adjustments necessary for GNI calculation, so confirm what your GDP series includes.
5. Compute GNI:
– GNI = GDP + net primary income from abroad (+ any tax/subsidy adjustments if required by your data definitions).
6. Optional: compute per‑capita and PPP adjustments:
– GNI per capita = GNI / midyear population.
– PPP‑adjusted GNI uses purchasing power parity conversion to compare living standards across countries.
Practical example (using illustrative 2024 numbers from cited sources)
– U.S.: GDP = $29.184T; GNI = $29.243T → net primary income = $29.243T − $29.184T = +$0.059T (≈ $59B).
– Ireland: GDP = $577B; GNI = $437B → net primary income = −$140B (indicating large payments to nonresidents).
How policymakers, analysts, and businesses can use GNI — practical steps
– For country classification and aid policy:
1. Use GNI per capita (not GDP) to classify countries by income level (World Bank practice).
2. Monitor trends in remittances, foreign investment income, and net primary income to assess vulnerability to external shocks.
– For fiscal/monetary policymaking:
1. Compare GDP and GNI trends. Large divergences signal that domestic output may not translate into resident income (important for tax base and consumption forecasting).
2. If GNI falls relative to GDP, consider policies to retain domestic benefits (e.g., taxing profit repatriation or incentivizing domestic reinvestment).
– For business and investment analysis:
1. Use GNI in conjunction with GDP to understand the income that accrues to residents versus foreign owners — useful when estimating local market size for consumer demand.
2. Watch net primary income flows for signs of capital flight, profit repatriation, or incoming investment cycles.
Data sources and where to find GNI figures
– World Bank data: GNI (current US$) and GDP series (current US$). World Bank provides GNI per capita and country time series.
– National statistical offices / central banks: for country‑specific, detailed national account and balance‑of‑payments data.
– IMF and OECD: alternative and harmonized datasets (IMF’s World Economic Outlook, OECD national accounts).
The bottom line
GNI measures the total income received by a country’s residents — both from domestic production and from income earned abroad — and is especially useful when cross‑border income flows (remittances, investment returns, repatriated profits) materially influence residents’ incomes. Analysts and policymakers should compare GNI with GDP to understand how much domestic production actually benefits a country’s residents and to inform classifications, fiscal planning, and policy design. Use GNI alongside other indicators (GNI per capita, GDP per capita, poverty rates, distribution metrics, and PPP adjustments) to obtain a fuller picture of economic well‑being.
Sources
– Investopedia, “Gross National Income (GNI)” (Laura Porter) — summary and illustrative examples.
– World Bank, GNI (Current US$) and GDP (Current US$) data series.