Consider the following:
(A) Salaries paid by a Japanese bank to the staff of its branch in Mumbai
(B) Rise in the stock of unsold goods of a firm in India during the year
(C) Food cooked at home by family members for themselves
(D) Old-age pension paid by the government
(E) Wage earned by an Indian citizen working for a firm in Saudi Arabia
How many of the above are included in the GDP of India?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Two
GDP counts the value of final production that takes place within the domestic economy during a year. Who owns the factor does not matter.
(A) Salaries paid by a Japanese bank to the staff of its branch in Mumbai — Included. The service is produced in India.
(B) Rise in the stock of unsold goods of a firm in India during the year — Included. A change in inventories is treated as investment, a part of final output.
(C) Food cooked at home by family members for themselves — Not included. Domestic services at home are not paid for and are not evaluated in money terms.
(D) Old-age pension paid by the government — Not included. A pension is a transfer payment, not a payment for current production. It is added only when Personal Income is worked out.
(E) Wage earned by an Indian citizen working for a firm in Saudi Arabia — Not included. It is produced abroad, so it is in Saudi Arabian GDP. It enters India’s GNP, not GDP.
NCERT (2026-27): “2.3 SOME MACROECONOMIC IDENTITIES Gross Domestic Product measures the aggregate production of final goods and services taking place within the domestic economy during a year. But the whole of it may not accrue to the citizens of the country. For example, a citizen of India working in Saudi Arabia may be earning her wage and it will be included in the Saudi Arabian GDP.” “… The households receive transfer payments from government and firms (pensions, scholarship, prizes, for example) which have to be added to calculate the Personal Income of the households.” “2.5 GDP AND WELFARE … 2. Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for.” “2.2.1 The Product or Value Added Method … Therefore, change in the inventory of a firm is treated as investment.” |