Question

For a country X, the Depreciation (capital consumption allowance) = Rs 20 Lakh crores; Import = Rs 25 lakh crores and Export= Rs 20 lakh crores. Calculate Net National Product (NNP) of the country, if the Gross Domestic Product (GDP) is Rs 160 Lakh crores.

• A. Rs 135 Lakh crores
• B. Rs 145 Lakh crores
• C. Rs 125 Lakh crores
• D. Rs 155 Lakh crores

Hint:

Remember the two-step shift:
1. $\text{Gross} \rightarrow \text{Net}$ (Subtract Depreciation).
2. $\text{Domestic} \rightarrow \text{National}$ (Add Net Exports NFIA).
Applying these sequentially ensures high accuracy.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
To find the Net National Product (NNP), we must first transition from a domestic product to a national product.
This is achieved by adding Net Factor Income from Abroad (NFIA) to the Gross Domestic Product (GDP).
Subsequently, we transition from a gross product to a net product by deducting Depreciation.
Key Formula or Approach:
The formulas required for these macroeconomic conversions are:
\[ \text{GNP} = \text{GDP} + \text{Net Factor Income from Abroad (NFIA)} \] In national accounting, if explicit factor income is not provided, net exports represent the adjustment:
\[ \text{NFIA} = \text{Export} - \text{Import} \] The Net National Product is calculated by subtracting depreciation from the Gross National Product:
\[ \text{NNP} = \text{GNP} - \text{Depreciation} \]

Step 2: Detailed Explanation:
Let us identify the parameters given in the question:
- $\text{GDP} = \text{Rs 160 Lakh crores}$
- $\text{Depreciation} = \text{Rs 20 Lakh crores}$
- $\text{Export} = \text{Rs 20 Lakh crores}$
- $\text{Import} = \text{Rs 25 Lakh crores}$
First, calculate the Net Factor Income from Abroad (NFIA):
\[ \text{NFIA} = 20 - 25 = -5 \text{ Lakh crores} \] Second, calculate the Gross National Product (GNP):
\[ \text{GNP} = 160 + (-5) = 155 \text{ Lakh crores} \] Third, calculate the Net National Product (NNP):
\[ \text{NNP} = 155 - 20 = 135 \text{ Lakh crores} \] Therefore, the Net National Product is Rs 135 Lakh crores.

Step 3: Final Answer:
The calculated NNP is Rs 135 Lakh crores, which corresponds to Option (A).