Question

How will you treat the following items in the calculation of Domestic Income and National Income of India ? Give reasons for your answer.
(i) Profits earned by a branch of Foreign Company in India.
(ii) Salaries of Indian employees working in Chinese Embassy in India.
(iii) Retained Earnings of Foreign Companies from India.
(iv) Salary of residents of Frnace working in Indian Embassy in France.
(v) Profits of Tata Industries from its business in Australia.

Answer 1

(i) It will be included in the Domestic Income as profits are earned within the domestic territory of India. However, it will not be included in the national income as it is a part of factor income paid abroad. It is subtracted from abroad.
(iii) It will be included in the Domestic Income as retained earnings have accrued within the domestic territory of India. However, it will not be included in the national income as it is a part of factor income paid abroad. It is subtracted from domestic income to get national income.
(iv) It will be included in the Domestic Income as Indian Embassy is a part of domestic territory of India. However, it will not be included in the national income as it is a part of factor income paid abroad. It is subtracted from domestic income to get national income.
(v) It will not be included in the Domestic Income as Tata Industries is located outside the domestic territory of India. However, it will be included in the national in the national income as it is a part of factor income from abroad.