How is the profit earned by an overseas branch of an Indian company treated in India’s GNP?
Answer and explanation
Correct answer: It is included in India’s GNP because it is income earned by an Indian resident unit
GNP is based on the income or production of a country’s normal residents, regardless of whether the activity occurs inside or outside the domestic territory. Hence, profit earned by an overseas branch of an Indian company is included in India’s GNP. It is not included in India’s GDP because GDP is restricted to production within India’s geographical territory.
Frequently asked questions
What is the correct answer to this question?
It is included in India’s GNP because it is income earned by an Indian resident unit
Why is this the correct answer?
GNP is based on the income or production of a country’s normal residents, regardless of whether the activity occurs inside or outside the domestic territory. Hence, profit earned by an overseas branch of an Indian company is included in India’s GNP. It is not included in India’s GDP because GDP is restricted to production within India’s geographical territory.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
