ntrod    tion    1.15
     gDP                                                     nDP
     Gross Domestic Product (GDP) is the value of            Net Domestic Product (NDP) is the GDP
     the all final goods and services produced within        calculated after adjusting the weight of the value
     the boundary of a nation during one year period.        of ‘depreciation’. This is, basically, net form of
     For India, this calendar year is from 1st April to      the GDP, i.e., GDP minus the total value of the
     31st March.                                             ‘wear and tear’ (depreciation) that happened in
          It is also calculated by adding national private   the assets while the goods and services were being
     consumption, gross investment, government               produced. Every asset (except human beings) go
     spending and trade balance (exports-minus-              for depreciation in the process of their uses, which
     imports). The use of the exports-minus-imports          means they ‘wear and tear’. The governments of
     factor removes expenditures on imports not              the economies decide and announce the rates
     produced in the nation, and adds expenditures of        by which assets depreciate (done in India by the
     goods and service produced which are exported,          Ministry of Commerce and Industry) and a list
     but not sold within the country.                        is published, which is used by different sections
                                                             of the economy to determine the real levels of
          It will be better to understand the terms used
                                                             depreciations in different assets. For example, a
     in the concept, ‘gross’, which means same thing
                                                             residential house in India has a rate of 1 per cent
     in Economics and Commerce as ‘total’ means
                                                             per annum depreciation, an electric fan has 10 per
     in Mathematics; ‘domestic’ means all economic           cent per annum, etc., which is calculated in terms of
     activities done whithin the boundary of a nation/       the asset’s price. This is one way how depreciation
     country and by its own capital; ‘product’ is used       is used in economics. The other way it is used in
     to define ‘goods and services’ together; and ‘final’    the external sector while the domestic currency
     means the stage of a product after which there is       floats freely as against the foreign currencies. If
     no known chance of value addition in it.                the value of the domestic currency falls following
          The different uses of the concept of GDP are       market mechanism in comparison to a foreign
     as given below:                                         currency, it is a situation of ‘depreciation’ in the
          (i) Per annum percentage change in it is the       domestic currency, calculated in terms of loss in
                ‘growth rate’ of an economy. For example,    value of the domestic currency.
                if a country has a GDP of Rs. 107 which           Thus, NDP = GDP - Depreciation.
                is 7 rupees higher than the last year, it         This way, NDP of an economy has to be
                has a growth rate of 7 per cent. When        always lower than its GDP for the same year,
                we use the term ‘a growing’ economy, it      since there is no way to cut the depreciation to
                means that the economy is adding up its      zero. But mankind has achieved too much in this
                income, i.e., in quantitative terms.         area through developments, such as ‘ball-bearing’,
         (ii) It is a ‘quantitative’ concept and its         ‘lubricants’, etc., all innovated to minimise the
                volume/size indicates the ‘internal’         levels of depreciation.
                strength of the economy. But it does not          The different uses of the concept of NDP are
                say anything about the ‘qualitative’ aspects as given below:
                of the goods and services produced.              (a) For domestic use only: to understand
        (iii) It is used by the IMF/WB in the                          the historical situation of the loss due to
                comparative analyses of its member                     depreciation to the economy. Also used
                nations.                                               to understand and analyse the sectoral