Glossary:Net domestic product (NDP)

Net domestic product at market prices, abbreviated as NDP, is gross domestic product (GDP) minus the consumption of fixed capital (CFC). NDP, unlike GDP, also takes into account the decrease in the value of fixed assets (e.g. computers, buildings, transport equipment, machinery, etc.) used in the production process.

Consequently, it is considered a better measure of production, especially since GDP and NDP have recently been shown to diverge because the composition of capital stocks has shifted to more short-lived high-technology (ICT) capital goods that decline in value more rapidly. Using NDP rather than GDP is also in line with the Stiglitz-Sen-Fitoussi report’s recommendation to focus on net rather than gross measures of economic activity.

However, as consumption of fixed capital is one of the most difficult national accounts concepts to measure, GDP is usually preferred for pragmatic reasons.

Related concepts

• Consumption of fixed capital (CFC)
• Fixed assets
• Gross domestic product (GDP)

Sources

• ESA 2010 par. 8.90