Will questions on National Incomes (statement question) be included in the Class XII Economics examination? If they will be included, how do we answer them? For example: Question: Whether the following is included in national income or not? Give reason. 1. Salary paid to a Russian working in the Indian Embassy in Russia. 2. Profit earned by a foreign company in India. 3. Profit earned by a foreign company in India owned by non-resident… I am confused whether the above examples are included in national income or domestic income.

(Abhishek Singla, D.A.V. Public School)

Such questions on national income are often included in the question paper in Economics, Class XII. You may refer to previous years' question papers for the same. The answers to such questions should be complete, giving the reasons. National income equals to Domestic Product + net factor income from abroad. An item will be included in domestic product if it has been earned in the domestic territory of that country. Similarly, income earned by residents of India will be included in India's national income. In Item 1 as cited, salary paid to a Russian working in the Indian Embassy in Russia will be included in the Domestic Factor Income of India but not in National Income of India.

It is because the Indian Embassy in Russia is a part of the domestic territory of India; hence it is the Domestic Factor Income of India. But since the income is not earned by a resident of India, it will not be included in national income of India. In Item 2, profits earned by a foreign company in India is part of India's domestic factor income as it is earned in the domestic territory. But it is not part of its national income because it is not earned by an Indian resident. In Item 3, the answer will be the same as that of Item 2.