Consider the following data and answer the questions based on it.
| Particulars | Amount (₹) |
|---|---|
| GNP at market prices | 1,06,000 |
| NDP at market prices | 1,00,000 |
| Indirect taxes | 14,000 |
| NNP at market prices | 90,000 |
| GNP at factor cost | 1,05,000 |
What is the value of depreciation (consumption of fixed capital)?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ₹16,000
Given:
GNPMP = ₹1,06,000
NNPMP = ₹90,000
Depreciation is the gap between gross and net: NNP = GNP − Depreciation.
Depreciation = GNPMP − NNPMP = 1,06,000 − 90,000 = ₹16,000
NCERT (2026-27): “Gross National Product (GNP) … Hence, GNP ≡ GDP + Net factor income from abroad (Net factor income from abroad = Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy). We have already noted that a part of the capital gets consumed during the year due to wear and tear. This wear and tear is called depreciation. Naturally, depreciation does not become part of anybody’s income. If we deduct depreciation from GNP the measure of aggregate income that we obtain is called Net National Product (NNP). Thus NNP ≡ GNP – Depreciation” |