Money sent as gifts by Indians working abroad to their families in India is recorded as transfers in the current account of India's balance of payments. In India's national income accounting, these gifts are:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → added to NNP at MP to get National Disposable Income
Gifts sent home by Indians abroad are current transfers, received without giving any service. They are not factor income, so they are not in NFIA, GDP or GNP. They are added to NNP at market prices to get National Disposable Income.
Option (1) counted in net factor income from abroad for GNP — Incorrect. NFIA covers factor income, such as wages and profits. A gift is not paid for any factor service.
Option (2) a part of India's GDP, as income received in India — Incorrect. GDP counts production in the country; a gift produces nothing.
Option (3) a part of India's GNP, as factor income from abroad — Incorrect. A gift is a transfer, not factor income from abroad.
Option (4) added to NNP at MP to get National Disposable Income — Correct. National Disposable Income = NNPMP + other current transfers from the rest of the world.
This question uses National Income Accounting and Open Economy Macroeconomics together.
NCERT (2026-27): “National Disposable Income and Private Income Apart from these categories of aggregate macroeconomic variables, in India, a few other aggregate income categories are also used in National Income accounting “National Disposable Income and Private Income The idea behind National Disposable Income is that it gives an idea of what is the maximum amount of goods and services the domestic economy has at its disposal. Current transfers from the rest of the world include items such as gifts, aids, etc.” “Chapter 6: Open Economy Macroeconomics – 6.1.1 Current Account: … Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. …” |