Question

“Domestic income is always less than national income.”
Do you agree with the given statement? Support your answer with valid arguments.

Hint:

Remember: National Income = Domestic Income + Net Factor Income from Abroad. If NFIA is positive, National Income>Domestic Income.

Answer 1

Yes, the statement is generally correct. Domestic income (also called Domestic Product or NDP at Factor Cost) refers to the income generated by normal residents and non-residents (foreigners) within the domestic territory of a country. National income, on the other hand, includes income earned by residents both within and outside the country. Here's a detailed explanation:
Domestic Income includes income earned within the geographical boundaries of the country by both residents and non-residents.
National Income includes income earned by Indian residents both within India and from abroad, and excludes income earned by foreigners within India.
Net Factor Income from Abroad (NFIA) is the key difference between national and domestic income. National Income = Domestic Income + NFIA.
In general, NFIA is positive for India because Indian residents working abroad send remittances and profits back to India, which increases national income.
Conclusion: Since NFIA is usually positive, national income is greater than domestic income.