Every morning a Tata Motors truck hauls forty tonnes from Pune to Nagpur. After a few years, the engine sputters, the suspension sags, and the chassis has a crack. The truck is wearing out. Economists give that wearing‑out an unromantic name: consumption of fixed capital, or simply depreciation.
When the national accounts put a number on the truck’s contribution to the economy, they add up the value of all the transport services it provided. They do not subtract the fraction of the truck’s life that was used up along the way. That is what “gross” means in GDP: before subtracting depreciation.
For the year ending March 2026, India’s GDP was ₹357.1 lakh crore (MoSPI). The net domestic product, or NDP, was ₹317.5 lakh crore. The gap, ₹39.7 lakh crore, is the depreciation bill India paid for using its existing capital stock: the worn‑out factory floors, the rusting bridges, the software that can no longer run the latest update, the highway whose surface has rutted.
Why do newspaper headlines and finance ministers prefer the gross number? Because depreciation is hard to measure. A company can tell you roughly how much its assembly line has devalued, and tax rules give it a formula. But what is the depreciation on a village panchayat road? On a government dam? On the UPI network’s codebase? Different accountants would give different answers, and those answers can swing by tens of thousands of crores. By using GDP, everyone avoids an argument about a number nobody can pin down precisely. The net figure is conceptually more honest, but it relies on estimates that are themselves shaky. So GDP remains the practical compromise.
There is a second sense in which GDP is gross: it counts the using‑up of built capital but not the using‑up of nature. When a mine extracts iron ore, GDP records the value of the ore sold. It does not record that the ore is gone forever, along with the topsoil and the water table. This is not a defect of the arithmetic; it is a choice about what to put a price tag on. Economists have long proposed “green GDP” measures that subtract natural resource depletion. No major economy has yet adopted one as its headline number, though several publish satellite accounts. India’s official GDP remains gross in both respects: it ignores the wear on the machine and the wear on the mountain.
GDP, then, is the economy’s turnover, not its profit. Keeping that distinction clear is what the word “gross” is there to do.
Key terms
Gross
Like measuring a shop’s total sales without subtracting the cost of the fans and freezers that wore out during the year. In national accounts, ‘gross’ means before deducting the using‑up of fixed capital (depreciation). It does not mean ‘total of everything imaginable’, GDP already excludes unpaid housework and other non‑market activities. It specifically refers to the treatment of capital consumption.
Depreciation (consumption of fixed capital)
The slow death of everything we build: the cracking of a bridge, the rusting of a truck, the dimming of a computer screen. Formally, it is the loss in value of fixed assets, machines, buildings, roads, vehicles, during a period due to wear and tear, ageing, or obsolescence. It is not the same as cash set aside for repairs; it is an accounting estimate of the economic value used up, not a bill that anyone paid.
Net Domestic Product (NDP)
GDP minus depreciation. Imagine a salon that earned ₹10 lakh in a year but whose chairs, scissors, and dryers lost ₹1 lakh in value. The NDP of the salon would be ₹9 lakh, the output after paying for the capital that got used up. It is still a production measure, not money that households receive. And it subtracts only the depreciation of built capital, not the depletion of natural resources.