question_answer

Calculate (i) Gross domestic product at market price and (ii) Factor income to abroad from the following data:

S. No.	Contents	(Rs.) in crores
(i)	Compensation of Employees	1,000
(ii)	Net Exports	(-) 50
(iii)	Profits	400
(iv)	Interest	250
(v)	Rent	150
(vi)	Gross National Product at Factor Cost	1,850
(vii)	Gross Domestic Capital Formation	220
(viii)	Net Fixed Capital Formation	150
(ix)	Change in Stock	20
(x)	Factor Income from Abroad	30
(xi)	Net Indirect Taxes	100

Or Will the following factor incomes be included in domestic factor income of India? Give reasons for your answer.

(i) Profits earned by a branch of State Bank of India in England.

(ii) Salary of Indian residents working in Russian Embassy in India.

(iii) Compensation of employees to the residents of Japan working in Indian embassy in Japan.

Answer:

By Income Method National Domestic Product at Factor Cost\[(ND{{P}_{FC}})\] = Compensation of Employees + Profits + Interest + Rent =1,000+400+250+150 =Rs. 1,800 crore Gross Domestic Product at Market Price\[(GD{{P}_{MP}})=ND{{P}_{Fc}}\] = + Net Indirect Taxes + Consumption of Fixed Capital* = 1,800+100+50=Rs. 1,950 crore                Gross National Product at Market price\[(GN{{P}_{MP}})\]\[(GD{{P}_{MP}})=ND{{P}_{Fc}}\] =+ Net Indirect Taxes =1,850+100 = Rs. 1,950 crore Net Factor Income from Abroad (NFIA) =\[GN{{P}_{MP}}-GD{{P}_{MP}}=1,950-1,950=0\] Now we know that, NFIA = Factor Income From Abroad - Factor Income to Abroad = 30 - Factor Income to Abroad \[\therefore \]Factor Income to Abroad = Rs.30crores        Note: *Consumption of Fixed Capital = Gross Domestic Capital Formation - Change in Stock ? Net Fixed Capital Formation \[=220-20-150=50\] Or (i) Profits earned by a branch of State Bank of India in England is not a part of domestic factor income of India because the branch of State Bank of India in England is not a part of domestic territory of India. (ii) Salary of Indian residents working in Russian Embassy in India is not included in domestic factor income of India because Russian embassy is not a part of domestic territory of India. (iii) Compensation of employees to residents of Japan working in Indian Embassy in Japan is a part of domestic factor income of India because Indian embassy in Japan is a part of domestic territory of India.