National Income is that income which is generated by the resident of the country within the domestic territory or outside the domestic territory.
So it is not necessary where the income is being generated. Only we have to look at "who” is generating the income.
This is different from domestic Income in which we look at “where” the income is generated
Let us understand the difference between Domestic Income and National Income with the table below :
Let us understand this with some examples
Income generated by a branch of State bank of India (SBI) in the USA.
Now SBI is resident of India (remember resident also applies to institution). But the USA is outside domestic territory
So this income is included in National Income and not included in Domestic Income because it is generated by a resident outside the domestic territory
Now suppose Microsoft earned profits from its Indian branch in New Delhi
Microsoft is non resident of India and Delhi is within the domestic territory of India
So it is included in Domestic Income and not included in National Income
Lets take another example. Reliance earned profits from “Reliance Mart” in New Delhi
Now Reliance is a resident of India and New delhi is within the dconomic territory of India
So it is included both in National Income and Domestic Income
Now there are 3 methods to calculate National Income . A lot of related (and somewhat twisted) questions can come in the civil services exam and so it is important to understand the concepts behind the formula rather than memorizing them.
There are 3 methods to calculate National Income :
Value added method