GNP is the estimated value of the total worth of production and services earned by the normal residents of a country. But to find out NNP, GNP deducts depreciation, why should we deduct depreciation from GNP?
The productive power of physical capital stock of a country diminishes gradually because of the wear and tear in the process of production. When the machine becomes totally unproductive, it has to be replaced by new machine. So, a sum of money is set aside every year into depreciation account and new machine can be purchased by utilising this accumulated sum.
So, depreciation is deducted from GNP in order to get more accurate measure of the sustainable production of goods and services in a country in a given year.