In the production of products and services, fixed capital is used. During the production process, machines get depreciated, or sometimes they get damaged due to wear and tear, and because of innovations, old machines become useless. Capital instruments get depreciated due to continuous use during the production process and some of them have also to be replaced. This depreciated value and replacement cost has to be deducted from Gross National Product for obtaining Net National Product at Market Price (NNPMP).
NNPMP – GNPMP – D
D = Depreciation
NNPMP = GNPMP – Depreciation
