Net National Product

Also called: NNP, NNP at market prices, NNPMP · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"

Meaning

Net National Product at market prices (NNP_MP) is the value of all final output that belongs to a country's normal residents in one year, after subtracting the capital that wore out while producing it.

NNP_MP = GNP_MP − depreciation = NDP_MP + NFIA

It shows how much a country can consume in a year without eating into its stock of machines and buildings. That makes it a better guide to lasting income than GDP. MoSPI's published Net National Income (NNI) is this same aggregate.

Explanation

How it is built: two adjustments to GDP

National income accounting starts from GDP. GDP is the market value of all final goods and services produced inside the domestic territory in one year. NNP_MP needs two changes to it:

• Domestic → National: add NFIA
• NFIA (net factor income from abroad) = factor income earned by Indian factors working abroad − factor income earned by foreign factors working in India.
• Factor income is a payment to a factor of production: wages, rent, interest or profit.

• GDP + NFIA = GNP (called GNI under SNA 2008) [3].

• Gross → Net: subtract depreciation

• Depreciation is the wear and tear of machines and buildings. Its official name is consumption of fixed capital (CFC).

• GNP − depreciation = NNP_MP.

• You can do the two steps in either order and get the same answer:

• GDP → (−Dep) → NDP_MP → (+NFIA) → NNP_MP
• GDP → (+NFIA) → GNP_MP → (−Dep) → NNP_MP

Where it sits in the aggregates chain

• GDP → (+NFIA) → GNP → (−Dep) → NNP_MP → (−NIT) → NNP_FC = National Income → PI → PDI.
• "At market prices" means it is valued at the prices buyers pay. Those prices include indirect taxes such as GST.
• Subtract net indirect taxes (NIT) (indirect taxes minus subsidies) and you get NNP at factor cost (NNP_FC). This is what workers, owners, lenders and landlords actually receive. NCERT calls NNP_FC National Income (NI).
• National disposable income = NNP_MP + other current transfers from the rest of the world (gifts, aid, remittances). It is the most goods and services the economy has available to consume or save.

Worked example

Take GDP_MP = 1,000, depreciation = 100, NFIA = −20, NIT = 80.

• GNP_MP = 1,000 + (−20) = 980
• NNP_MP = 980 − 100 = 880
• Check: NDP_MP = 1,000 − 100 = 900, and 900 + (−20) = 880 ✓
• NNP_FC (NI) = 880 − 80 = 800

Working backwards (NCERT Ex. 7): GDP_MP 1,100, NFIA 100, NIT 150, NI 850.

• NNP_MP = NI + NIT = 850 + 150 = 1,000
• GNP_MP = 1,100 + 100 = 1,200
• Depreciation = 1,200 − 1,000 = ₹200 crore

What makes NNP_MP rise or fall

• More output (GDP up) → NNP_MP up.
• Larger capital stock → more depreciation → a bigger gap between GNP and NNP.
• NFIA changes:
• More profits and interest paid to foreign investors → NFIA more negative → NNP_MP down.

• Higher earnings of Indians working or investing abroad → NNP_MP up.

• Higher indirect taxes or lower subsidies → NNP_MP rises, but NNP_FC does not. The gap is only a price effect, not more real output.

In India

• Who measures it: MoSPI's National Statistics Office (NSO) publishes it as Net National Income (NNI) = GNI − CFC [3]. It is built from market prices, so in NCERT terms it is NNP_MP, not NNP_FC (derived from [2][3]).
• Latest level (2025-26, Provisional Estimates, current prices): NNI was ₹2,95,62,127 crore [2].

• It equals NDP ₹2,99,93,131 crore [2] + NFIA ≈ −₹4,31,004 crore (derived from [2]).

• Why India's NNP is below its NDP:

• Foreign investors own many companies, shares and loans in India.
• The profits, interest and dividends India pays them are larger than what Indians earn abroad.

• So NFIA is negative, about −1.2% of GDP in 2025-26 (derived from [2]).

• Depreciation is large: CFC was about ₹46,42,507 crore in 2025-26, about 13.4% of GDP (derived from [2]). So about ₹13 of every ₹100 of GDP only replaces worn-out capital.

• Per capita NNI (the measure used as "per capita income"):
• ₹1,92,774 in 2024-25 (First Revised Estimate) and ₹2,08,090 in 2025-26 (Provisional Estimate), at current prices [2].

• At constant (2022-23) prices it was ₹1,93,480 in 2025-26, up 6.8%. At current prices the growth was 7.9% [2]. The gap between the two is inflation.

• Transfers on top: Net National Disposable Income (NNDI) was ₹3,07,59,131 crore in 2025-26 [2]. NNDI − NNI = ₹11,97,004 crore, mostly remittances (derived from [2]).

• Series: These figures use the new base year 2022-23, released on 27 February 2026 [2][3]. The Advisory Committee on National Accounts Statistics chose that year [3]. A back series is expected by December 2026 [3].

Don't confuse with

• NNP at factor cost (National Income): NNP_FC = NNP_MP − net indirect taxes. NCERT's "National Income" is NNP_FC. MoSPI's "NNI" is NNP_MP.
• NDP_MP: NDP = GDP − depreciation. It covers output produced inside India. NNP adds NFIA and covers output owned by residents. NNP = NDP + NFIA.
• GNP/GNI: GNP is gross, so depreciation has not been taken out yet. NNP = GNP − depreciation, so NNP is always smaller.
• Net National Disposable Income: it adds current transfers such as remittances to NNP_MP. Remittances are not part of NNP, because they are transfers, not factor income.

Prelims Hooks

• NNP_MP = GNP_MP − depreciation = NDP_MP + NFIA. National Income (NCERT) = NNP_FC = NNP_MP − net indirect taxes.
• Trap: MoSPI's "NNI" = GNI − CFC, which is built from market prices. So it is NNP_MP, not NCERT's factor-cost National Income [2][3].
• India's NFIA is negative (≈ −₹4.31 lakh crore in 2025-26), so NNI < NDP and GNI < GDP [2].
• Per capita NNI was ₹2,08,090 in 2025-26 (current prices, base 2022-23) [2].
• Worker remittances do not enter NNP. They enter national disposable income.
• The official name for depreciation is consumption of fixed capital (CFC). It was about 13.4% of GDP in 2025-26 (derived from [2]).

Mains Points

• Net measures are a better guide to lasting growth:
• About 13.4% of GDP (2025-26) only replaces worn-out capital (derived from [2]).
• As India builds more infrastructure, the gap between GDP and NNP grows. So NNP shows income that can be kept up over time better than headline GDP does.

• This links to green accounting, which asks that loss of natural capital (forests, groundwater, minerals) also be subtracted.

• Ownership versus production:

• India's negative NFIA means residents own less than the economy produces. Large remittance inflows then lift NNDI above NNI [2].

• Welfare policy should track NNI, NNDI and PDI alongside GDP. Examples are diaspora incentives, cheaper remittance channels and managing outflows of foreign investment income.

• Averages hide who gains:

• Per capita NNI rose to ₹2,08,090 in 2025-26 [2]. But it is an average, so a few very rich people can pull it up while most stay poor.
• It needs household data (PLFS, consumption surveys) alongside it. Base revisions and the move to SNA 2025 make the data more comparable over time, but they can also reset levels and spark debate [3].

Related concepts

• Gross National Product
• Net factor income from abroad
• Normal residents
• Domestic territory
• Net Domestic Product
• NDP at factor cost
• GNP at factor cost
• National income
• Personal income
• Undistributed profits

Read more

• From GDP to personal disposable income: the aggregates chain