Non-Monetary Exchanges: GNP does not take into account those transactions that are not expressed in monetary terms. This is a major limitation of GDP as an index of the welfare of a country as there, are many transactions which although are non-monetary in terms but add to the growth and. development of the nation. For example, work was done by a social worker or a homemaker. Here, a homemaker adds to the welfare of the family by keeping them healthy, which, in turn, adds to the welfare of the country. However, as such transactions are non-monetary in nature, these are not included while calculating the domestic income In less developed countries there are various non-monetary exchange particularly in the rural areas and household sector. Consequently, such transactions remain outside the domain of GNP leading to underestimation of the value of GNP. Thus, GNP cannot be regarded as an index of economic welfare, as it ignores the household and the volunteer sectors.
