Q.What is Net Factor Income from Abroad (NFIA)? How does it convert GDP into GNP?
Net Factor Income from Abroad (NFIA) = (factor income earned by a country's normal residents from the rest of the world, e.g. wages of Indians working abroad, profits of Indian-owned firms operating overseas) − (factor income earned by non-residents from within the country, e.g. profits repatriated by a foreign company operating in India).
If NFIA is positive (residents earn more abroad than foreigners earn domestically), GNP is larger than GDP. If NFIA is negative — common in countries that host large amounts of foreign direct investment relative to how much their own residents invest abroad — GNP falls below GDP. For India, NFIA has generally stayed a small figure, reflecting sizeable inbound remittances from Indians working abroad set against profit outflows to foreign investors operating within India.
NFIA = income earned abroad by residents minus income earned domestically by non-residents; GNP = GDP + NFIA.
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