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Wednesday, 18 May 2011

Importance of GNP



The statistics of GNP throws light on the development of various sectors of the economy. The importance of GNP can be judged by the following facts :

1. Study of Economic Condition :-
The national income throws light on the economic condition of the country. If GNP increases over a year, it shows that we are going towards prosperity. If it falls it indicated that economy is declining.

2. Comparison with other Countries :-
The GNP figures help us to know the economic position of the people of the various countries and we can make comparison with our own GNP.

3. Information about Saving, Investment and Consumption :-
The study of GNP provides us the information about the marginal prosperity to consume and saving. So it guides us in making the policies about saving and investment.

4. Information about the Distribution of Wealth :-
The GNP throws light on the earnings of the various factors of production and the total out put of the country. It also informs that distribution of wealth is equal or unequal.

5. Solution of Economic Problems :-
The study of GNP is very useful for the economists in solving the problems of inflation, deflation, poverty and low standard of living.

6. Information about the Various Sectors :-
The study of national income also informs us about the contribution of various sectors like agriculture, industry, insurance and transport. If any one sector is less productive then different measures can be adopted to improve it.

7. Guidance for Economic Planners :-
The study of GNP is very useful for the government and the planners to frame the economic policies.

8. Government Contribution in the Economic Development :-
GNP also throws light on the role of state played for economic development of the country. In a socialistic economy it has full control while in a mixed economy government and public both co-operate with each other to improve the economic condition of the country.

9. Foreign Debt :-
The study of GNP shows the expenditure and source of the country. So to fill the gap between revenue and expenditure foreign aid is demanded.

10. Information about Employment :-
The GNP also throws light on the source of employment. For example GNP of Pakistan shows that major portion of our population is engaged with agriculture.

11. Analysis of Balance of Payment :-
Through the GNP we know the import and export condition of the country. The deficit in the balance of payment is met by the different methods.

12. Rate of Economic Growth :-
The GNP also throws light on the rate of economic growth. We can also make a comparison of present rate of growth with the previous years. It indicates that rate economic development is increasing or falling.

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