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CA Foundation · Business Economics · Determination of National Income

Which of the following will be included in India's GDP for the year but NOT specifically in the GNP difference from GDP, that is, it is already part of GDP and does not alter NFIA?

The output of a Tata factory in Pune sold within India is included in GDP and does not affect net factor income from abroad. The other items are cross-border factor payments or receipts, such as profits remitted abroad, foreign salaries or foreign interest, which form part of NFIA.

  1. AProfit earned in India by a foreign-owned company and sent abroad
  2. BSalary earned by an Indian engineer working temporarily in the USA
  3. COutput of a Tata factory in Pune sold within IndiaCorrect
  4. DInterest received by an Indian resident on a foreign bank deposit

Explanation

Output of a factory located in India is domestic production, so it is included in GDP and involves no factor income from or to abroad, hence NFIA is unchanged. The other options involve cross-border factor incomes: profit sent abroad is a factor payment to abroad, and salary and interest earned abroad are factor receipts from abroad, all of which are part of NFIA.

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