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CA Foundation · Business Economics · Determination of National Income

A resident of India working temporarily for an Indian-owned company's branch in Dubai earns a salary there. In computing India's national income aggregates, this salary is:

The salary is included in India's GNP but not in its GDP. GDP covers production within the domestic territory only, whereas GNP covers income of normal residents of India from anywhere, so the Dubai earnings enter through net factor income from abroad.

  1. AIncluded in India's GNP but not in India's GDPCorrect
  2. BIncluded in India's GDP but not in India's GNP
  3. CIncluded in both India's GDP and GNP
  4. DExcluded from both GDP and GNP of India

Explanation

GDP counts only production within India's domestic territory, so income earned in Dubai is outside it. GNP counts income earned by normal residents of India, wherever earned, so the salary is part of net factor income from abroad and hence of GNP. Including it in GDP would confuse the domestic and national concepts.

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