Net Domestic Product (NDP) is the GDP calculated after adjusting the weight of the value of ‘depreciation’.
NDP = GDP – Depreciation
Government announces the rate of depreciation in the economy.
In domestic use, NDP is used to understand the loss due to depreciation.
NDP is used to understand the historical situation of the loss due to depreciation to the economy.
NDP is not used in comparative economics, i.e., to compare the economies of the world. This is due to different rates of depreciation which is set by the different economies of the world.
Net Domestic Product at Market Price (MP)—
It is the money value of all final goods and services produced within domestic territory of a country during an accounting year and do not include depreciation.
NDP MP = GDP MP – Depreciation
Net Domestic Product at FC (Factor Cost)—
It is the value of all final goods and services which does not include depreciation charges and net indirect tax.
Thus it is equal to the sum of all factor incomes (compensation of employees, rent, interest, profit and mixed income of self-employed) generated in the domestic territory of the country.
NDP FC = GDP at MP – Depreciation – Indirect tax + Subsidy