Q. Gross National Product (GNP) is the GDP of a country added with its income from abroad. Which of the following is/are come/comes under income from abroad?
1.Private remittances
2.Interest on external loans
3.External grants
Choose the correct answer from below given codes:

[A] 1 only

[B] 1 and 2 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: D

Explanation: Gross National Product (GNP) is the GDP of a country added with its ‘income from abroad’. Here, the trans-boundary economic activities of an economy are also taken into account.

The items which are counted in the segment Income from Abroad are:

  1. Private Remittances: the net outcome of the money which inflows and outflows on account of the ‘private transfers’ by Indian nationals working outside of India (to India) and the foreign nationals working in India (to their home countries). On this front India has always been a gainer- till the early 1990s from the Gulf region (which fell down afterwards in the wake of the heavy country-bound movements of Indians working there due to the Gulf War) and afterwards from the USA and other European nations.
  2. Interest on External Loans: the net outcome on the front of the interest payments, i.e., balance of inflow (on the money lend out by the economy) and outflow (on the money borrowed by the economy) of external interests. In India’s case it has always been negative as the economy has been a ‘net borrower’ from the world economies.
  3. External Grants: the net outcome of the external grants i.e., the balance of such grants which flow to and from India. Today, India offers more such grants than it receives. India receives grants (grants or loan-grant mix) from few countries as well as UN bodies (like the UNDP) and offers several developmental and humanitarian grants to foreign nations.

Source: TMH Ramesh Singh