BharatNotes Depreciation
nounUsage in a UPSC answer
A sustained depreciation of the rupee, while inflating the import bill for crude and capital goods, can simultaneously enhance the competitiveness of Indian exports, leaving policymakers to weigh price stability against the trade balance.
Synonyms
Antonyms
Word Family
depreciate (v), depreciated (adj), depreciating (v pres.p), depreciatory (adj), depreciable (adj)
Root
Late Latin dēpretiātiō; dē- = down + pretium = price, value; literally a lowering of value
Etymology
From late Latin dēpretiātiō, from Latin dē- ("down") + pretium ("price, value") — literally "a lowering of value."
Memory Hook
De- (down) + pretium (price) — the "price" goes DOWN; think of a new car losing value the moment it leaves the showroom.
How This Word Works in UPSC Writing
In national accounting, depreciation is the consumption of fixed capital, the value of the capital stock used up in producing a year's output. It is the single bridge between gross and net aggregates: GDP minus depreciation gives NDP, GNP minus depreciation gives NNP, and NNP at factor cost is what is reported as National Income. The analytical point is that net measures are the truer welfare indicator, because output produced by wearing out machinery is not income a country can sustain, yet gross measures dominate reporting because depreciation is estimated by convention rather than observed. Note also the trap of two unrelated senses, since currency depreciation is a different concept entirely.
Don’t Confuse It With
Depreciation in national accounts is the physical wearing out of fixed capital. Currency depreciation is a market-driven fall in the exchange rate under a floating regime, and is distinct from devaluation, which is a deliberate official reduction under a fixed or pegged regime. Amortisation is the equivalent write-down applied to intangible assets. Gross fixed capital formation is the addition to the capital stock from which depreciation is subtracted to give the net figure.
Hindi Meaning
मूल्यह्रास (mūlyahrās); for the currency sense, अवमूल्यन is devaluation while मुद्रा का मूल्यह्रास is depreciation.
Common Questions
- What is depreciation in national income accounting?
- The consumption of fixed capital, meaning the value of machinery, equipment and buildings used up in producing the year's output.
- How are NDP and NNP obtained?
- By subtracting depreciation from the corresponding gross measure: GDP minus depreciation gives NDP, and GNP minus depreciation gives NNP.
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