what items are included in national income and domestic income
Answers
Some of the major items whether included or excluded in national income are as follows:
1. Construction of a new house.
Yes, it will be included in the national income as it is a part of capital formation and leads to production of goods and services in the economy.
2. Winning of a lottery prize.
No, it will not be included in the national income as it does not add to the flow of goods and services
3. Increase in the prices of stocks lying with a trader.
No, it will not be included in the national income as it does not amount to any flow of goods.
4. National debt interest.
Interest on public debt.
No, it is not included in the national income as it is the interest paid on loans taken by government to meet its consumption purposes.
5. Rent-free house given to an employee by an employer.
Yes, it is included in the national income by Income Method since it is a part of ‘wages in kind’ paid to employees.
6. Profit earned by foreign banks in India.
No, it is not included in the national income as it is a part of the factor income paid abroad. It is subtracted from domestic income to get national income.
7. Purchases by foreign tourists.
Food purchased by a foreign tourist at a hotel in New Delhi.
Yes, purchases by foreign tourists are ‘exports’ and, therefore, they are included in the national income through the Expenditure Method.
8. Rent received by Indian residents on their buildings rented out to foreigners in India.
Yes, it will be included in the national income as it is a part of the factor income from abroad.
9. Payment of fees to a lawyer engaged by a firm.
It is an intermediate expenditure for the firm because it involves purchase of services by one production unit (firm) from another production unit (lawyer). So, it is deducted from the value of output of the firm to arrive at the value added. So, it is not included in national income.
10. Free medical facilities by the employer.
Free boarding and lodging provided to a domestic servant.
Yes. It will be included in national income as these free services are part of compensation to employees.
11. Gifts received from abroad.
Gift received from employer.
National income as gifts received are transfer incomes.
12. Profits of Reliance Industries from its chemicals business in Australia.
Yes, it will be included in the national income as it is a part of the factor income from abroad.
13. Salaries received by Indian residents working in Russian Embassy in India.
Yes, it will be included in the national income as it is a pan of factor income from abroad.
14. Subsidized lunch served to workers in a factory.
Firm incurred expenditure on medical treatment of employee’s family.
Yes, it is a part of the compensation of employees and, therefore, it will be included in the national income.
15. Old age pension
No, it will not be included in the national income as it is a transfer payment made by the government and a transfer income for the receiver.
Old age pension must not be confused with retirement pension. Old age pension is not included in national income as it is a transfer payment. On the other hand, retirement pension is included in national income as it is a part of COE.
16. Durable goods purchased by a household.
Purchase of car by a household.
Yes, it will be included in the national income as it is a part of the private final consumption expenditure.
17. Profits earned by an Indian bank from its branches abroad.
Yes, they will be included in the national income as they are a part of the factor income from abroad.
18. Earnings of shareholders from the sale of shares.
No, it will not be included in the national income as it is a financial claim and does not contribute to any productive activity.
19. Expenditure on advertisement by a firm.
Commodities used in scientific research.
No, it will not be included in the national income as it is a part of intermediate consumption expenditure.
20. Petrol used in police vehicles.
No, it will not be included in national income as petrol is an intermediate good in this case. It is used for the provision of the final product