Net Domestic Product (NDP)
Net domestic product (NDP) measures the economic output of a country. It represents the net book value of all finished goods and services produced inside a country geographically during a given period. NDP is a key indicator of a country’s economic growth.
Compared with Gross Domestic Product (GDP), NDP takes the depreciation of the country’s capital assets into account, including housing, vehicles, machinery, and so on. The depreciation is known as capital consumption allowance (CCA). It measures the amount of money that a country spends to maintain its current economic production level during a specific period.
Net not only covers the accounting depreciation but also accounts for other causes of the decrease in value, for example, obsolescence and destruction.
- NDP = GDP – Depreciation
Gross investment is used to calculate GDP, while net investment (gross investment – depreciation) is used to calculate net domestic product. NDP can be calculated by subtracting the depreciation of the capital stock of a country from its GDP.
Net domestic product is sometimes considered a better economic indicator than GDP since the former also reveals the amount of investment spent on improving the obsolete equipment to maintain the production level.
