Government Shifts to NDP as Key Economic Metric
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India Considers Shift to Net domestic Product Following SNA 2025 Recommendations
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New Delhi – India is evaluating a transition to Net Domestic product (NDP) as a primary indicator of economic performance, aligning its national accounting practices with the United Nations’ System of National Accounts (SNA) 2025. This change, currently underway with a base-year revision, will alter how the central bank is treated in national accounts.
Last updated: January 5, 2026, 22:19:03
What is Changing and Why?
The ongoing base-year revision of India’s national accounts is designed to comply with the recommendations outlined in SNA 2025.A key alteration involves classifying central bank output as non-market activity
. Previously, payments made by banks for regulatory services were considered service fees. Under the new framework, these payments will be categorized as current transfers
.
According to officials, this reclassification will increase value added in the financial sector and subsequently affect both GDP and NDP levels. Though, the change is not expected to impact national saving, net lending, or net worth.
Understanding the Difference: GDP vs. NDP
Gross domestic Product (GDP) measures the total value of goods and services produced within a country’s borders. Net Domestic Product (NDP), on the other hand, accounts for depreciation – the reduction in the value of assets over time. SNA 2025 considers NDP a more conceptually sound measure of economic well-being as it provides a clearer picture of lasting economic activity.
| Metric | Definition |
|---|---|
| GDP | Total value of goods and services produced within a country. |
| NDP | GDP minus depreciation of assets. |
Impact on the Central Bank
The shift in classifying central bank output as non-market activity is a significant aspect of the SNA 2025 implementation.Traditionally, the services provided by the central bank were treated as market transactions. The new approach recognizes that many of these services are inherently regulatory in nature and are not driven by profit motives.
By treating payments for regulatory services as current transfers, the accounting reflects the redistributive function of the central bank rather than a commercial exchange. This change doesn’t alter the overall economic picture regarding savings or wealth accumulation, but it provides a more accurate depiction of the central bank’s role.
SNA 2025: A Global Standard
The System of National accounts (SNA) is an internationally agreed-upon standard for measuring a country’s economic activity.Developed by the United Nations Statistics Commission, the SNA provides a extensive framework for compiling national accounts. SNA 2025 is the latest revision, incorporating advancements in economic understanding and statistical methodologies. Adopting SNA 2025 allows for better international comparability of economic data