3. Classify the following as factor income to abroad or factor income from abroad: a. Salary paid to American working in Indian embassy in USA. b. Rent paid by Pakistan embassy located in India. c. Undistributed profits earned by SBI branch in Singapore. d. Dividend received by Indian from a foreign firm. e. Interest paid to Japanese by TATA group of India. f. Profit earned by branch of SBI in London. g. Rent received by an Indian from his building in Singapore. h. Salaries to Indian residents working in the Pakistan embassy in India. i. Profit earned by MNC of USA in India. j. Rent received by a foreigner from his building in India. k. Salaries to the residents of England working in Indian embassy in England.
Answer (1)
In economics, the concepts of factor income to abroad and factor income from abroad are part of national income accounting. Here's how to classify each item in the question:
Salary paid to American working in Indian embassy in USA : This is considered factor income from abroad for India. The Indian embassy in the USA is considered part of Indian territory for economic purposes, so paying salary to an American is importing a service.
Rent paid by Pakistan embassy located in India : This is called factor income to abroad . Since the payment is made to the Pakistan embassy, which counts as foreign territory.
Undistributed profits earned by SBI branch in Singapore : This is categorized as factor income from abroad . It represents earnings by an Indian company in a foreign location.
Dividend received by Indian from a foreign firm : This is factor income from abroad , as it is income earned by an Indian resident from foreign investments.
Interest paid to Japanese by TATA group of India : This falls under factor income to abroad , as it is income going out from India to a foreign recipient.
Profit earned by branch of SBI in London : This is categorized as factor income from abroad , because these profits are generated in a foreign country and earned by an Indian entity.
Rent received by an Indian from his building in Singapore : This is considered factor income from abroad , as the rent is income coming into India from overseas.
Salaries to Indian residents working in the Pakistan embassy in India : This is factor income to abroad . The Pakistan embassy pays for services rendered in India.
Profit earned by MNC of USA in India : This is called factor income to abroad , as it represents foreign entities earning profits within India.
Rent received by a foreigner from his building in India : This is classified as factor income to abroad , since the income is being paid to a foreign owner of an Indian property.
Salaries to the residents of England working in Indian embassy in England : This is considered factor income from abroad . The Indian embassy is part of India’s economic territory, so paying salary to an English resident is importing a service.
These classifications help economists understand the flow of income between countries and measure the net factor income from abroad, a component of a country's gross national income (GNI).
