If an Indian company produces in Nepal, why is that production not included in India's GDP?
Answer and explanation
Correct answer: Because the production takes place outside India's domestic territory
GDP measures the value of final goods and services produced within a country's domestic or economic territory, irrespective of the nationality of the producer. Since the Indian company's factory is located in Nepal, that production belongs to Nepal's domestic output rather than India's GDP. The income received by Indian residents may be relevant when calculating national measures such as GNP or national income, subject to the appropriate income-from-abroad adjustment.
Frequently asked questions
What is the correct answer to this question?
Because the production takes place outside India's domestic territory
Why is this the correct answer?
GDP measures the value of final goods and services produced within a country's domestic or economic territory, irrespective of the nationality of the producer. Since the Indian company's factory is located in Nepal, that production belongs to Nepal's domestic output rather than India's GDP. The income received by Indian residents may be relevant when calculating national measures such as GNP or national income, subject to the appropriate income-from-abroad adjustment.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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