NET NATIONAL PRODUCT

The Indian economy is the fourth largest economy of the world

on the basis of purchasing power parity. It is one of the most attractive
destinations for business and investment opportunities due to huge
manpower base, diversified natural resources and strong macro-economic
fundamentals. Also the process of economic reforms initiated since 1991 has
been providing an investor friendly environment through a liberalized policy
framework spanning the whole economy. National income statistics provide
a wide view of the country’s entire economy. As well as of the various
groups in the population who participate as producers and income receivers.
And that if available over a substantial period, they reveal clearly the basic
changes in the country’s economy in the past and suggest, if not fully reveal
the trends for future.

A national income estimate measures the volume of all goods

and services produced during a period, counted without duplication. Thus
total national income measures flow of goods and services in an economy.
The growth and performance of Indian economy is explained in terms of
statistical information provided by various parameters.
Various indicators relating to national income are
• GROSS NATIONALPRODUCT(GNP)
• GROSS DOMESTIC PRODUCT(GDO)
• NET NATIONAL PRODUCT(NNP)
• PER CAPITA INCOME AND
• GROSS DOMESTIC CAPITAL FORMATION (GDCF),etc.

NET NATIONAL PRODUCT (NNP)

it is the total market value of all final goods and services produced in a year
by the citizens of an economy during a given period of time usually 1 year
(GROSS NATIONAL PRODUCT OR GNP ) minus depreciation.
National income is money value of all goods and services produced in a
country during an year-J.K.KEYNES.
NNP=GNP-depreciation
GROSS NATIONAL PRODUCT (GNP)
Money value of all final goods and services produced in a given
period plus earning from abroad

Depreciation
Consumption of fixed capital or fall in value of capital due to wear
and tear measures the amount of GNP that must be spent new capital goods to
maintain the existing physical capital stock. We use up some capital, ie.
Equipments. Machinery, etc, in the process of production. The capital goods
like machinery wear out or fall in value as a result of the consumption or use
in the production process. This consumption of fixed capital or fall in value
of the capital due to wear and tear is termed as depreciation.
While the gross national product includes, in addition to final consumer’s
goods and services, all the new capital goods produced in the period in
question without any deduction for the capital goods consumed in the
process, the net national product includes only the final consumption goods
and services, plus the net addition to capital goods, account having been
taken of the capital consumption. Thus suppose that in the year 1977 the
gross national product was Rs 40,000 crores and capital consumption
involved in the production is amount Rs4000 crores. This shows that the net
national income for 1977 was only Rs 36,000 crores

Net national product at factor cost

It is the sum of all incomes earned by factors of production
through their involvement in the process of production of net national
product or net national income.
This nomenclature may seem to be rather unfortunate as all the
five concepts represent a kind of national income. National income at factor
cost means the sum of all incomes earned by the factors of production
through their involvement in the process of production of the net national
product or net national income. In other wards national income at factor cost
shows how much it to the society, in terms of economic resources, to
produce net national product. It is for the net national product at factor cost
that we use national income. The difference between the national income
and net national product arises from the fact that indirect taxes (such as
excise, sales tax, tariff duties etc) and subsidies cause market price of output
to be different from the factor income resulting from it.
 Sales tax is an example for indirect tax. This is collected by adding
tax to price of the commodity. To know original price, we have to deduct
sales tax from the selling price of the commodity.
During festival season’s handloom and khaddar products were
given rebate. This means 20% is given by the government as subsidy. To
know original price of handloom product sold during festival season, we
have to add the subsidy given to the selling price of the product.
This process is followed in the calculation of national income.
National income is calculated by adding subsidies and deducting indirect tax
from net national product
national income at factor cost = NNP +subsidies –indirect taxes
Per capita income
It is the income which is received by the individuals or
households in a country during the year from all the resources. Thus it
excludes those factor payments which are not received by individuals and
includes all non-factor payments (transfer payments )that are received by
individuals.
Personal income= national income +transfer payments- (social security
Contributions +corporate income taxes +undistributed
Corporate profit

NNP and per capita income from 1999-2000 to 2006-2007

99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07

NNP at 1590212 1653087 1755280 1823126 1986858 2141776 2325282 2522576
1999-
2000price
NNP at 1590212 1704719 1856217 2003282 2268576 2531223 2858862 32,96,639
current
price
Per capita 15886 16223 16910 17281 18517 19649 21005 22483
income at
1999-
2000price
Per capita 15886 16729 17883 18988 21142 23222 25825 29382
income at
current
price
Net national product is a better concept than gross national product because
it makes proper allowance for depreciation. It is useful in the analysis of
long run problems of manufacturing & increase the supply of capital goods
in the country. It eliminates the elements of double counting. it enables us to
measure the welfare of the whole body of consumers in the country.