It is net money value of Goods and Services Produced in domestic territory after Depreciation
It is also called Net Domestic Product at Factor Price (NDP FC )
NDP FC = GDP FC - Depreciation
Suppose total value of goods and services produced in DOMESTIC TERRITORY is 100
Depreciation on Maintaining Fixed assets is 20
What is Domestic Income?
|NDP FC (Domestic Income)||80|
Why is this Depreciation Reduced?
It is reduced to account for wear and tear of capital goods
A part of Income which a country earned is consumed in maintaining existing capital goods (fixed assets)
So we reduce it to get correct Net Domestic Product
In above case
Country earned income of Rs 100 but out of this, Rs 20 was spent towards Depreciation
Hence, country actually earned Domestic Income of Rs 80