1.16 ndian onom
situation of depreciation in industry and Gulf region (which fell down afterwards
trade in comparative periods. in the wake of the heavy country-bound
(b) To show the achievements of the economy movements of Indians working there due
in the area of research and development, to the Gulf War) and afterwards from
which have tried cutting the levels of the USA and other European nations.
depreciation in a historical time period. Today, India is the highest recipient of
However, NDP is not used in comparative private remittances in the world—as per
economics, i.e., to compare the economies of the the World Bank projected at $72 billion
world. Why this is so? This is due to different in 2015 (in 2013 it was $70 billion, the
rates of depreciation which is set by the different year’s highest). China falls second ($ 64
economies of the world. Rates of depreciation billion) in 2015.
may be based on logic (as it is in the case of (ii) Interest on External Loans: the net outcome
houses in India—the cement, bricks, sand and on the front of the interest payments, i.e.,
iron rods which are used to build houses in India balance of inflow (on the money lend out
can sustain it for the coming 100 years, thus by the economy) and outflow (on the
the rate of depreciation is fixed at 1 per cent per money borrowed by the economy) of
annum). But it may not be based on logic all the external interests. In India’s case it has
time, for example, upto February 2000 the rate always been negative as the economy has
of depreciation for heavy vehicles (vehicles with been a ‘net borrower’ from the world
6-wheels and above) was 20 per cent while it was
economies.
raised to 40 per cent afterwards—to boost the sales
of heavy vehicles in the country. There was no (iii) External Grants: the net outcome of the
logic in doubling the rate. Basically, depreciation external grants i.e., the balance of such
and its rates are also used by modern governments grants which flow to and from India.
as a tool of economic policymaking, which is the Today, India offers more such grants than
third way how depreciation is used in economics. it receives. India receives grants (grants
or loan-grant mix) from few countries
gnP as well as UN bodies (like the UNDP)
Gross National Product (GNP) is the GDP of and offers several developmental and
a country added with its ‘income from abroad’. humanitarian grants to foreign nations. In
Here, the trans-boundary economic activities of the wake of globalisation, grant outflows
an economy is also taken into account. The items from India has increased as its economic
which are counted in the segment ‘Income from diplomacy aims at the playing bigger role
Abroad’ are: at international level.
(i) Private Remittances: the net outcome of Ultimately, the balance of all the three
the money which inflows and outflows components of the ‘Income from Abroad’ segment
on account of the ‘private transfers’ may turn out to be positive or negative. In India’s
by Indian nationals working outside case it has always been negative (due to heavy
of India (to India) and the foreign outflows on account of trade deficits and interest
nationals working in India (to their home payments on foreign loans). It means, the ‘Income
countries). On this front India has always from Abroad’ is subtracted from India’s GDP to
been a gainer- till the early 1990s from the calculate its GNP.