Posted by Anjali Kaur on Aug 27, 2020

Domestic Territory & Normal Residents

Under national income, the concept of domestic territory and normal residents is crucial. Students get identification questions on this topic and are asked to provide the reasoning of the same. Let’s learn.

Domestic Territory

Domestic territory or economic territory or political territory means the same. Domestic territory means the political boundaries of a country in case of national income.

Domestic territory includes the following:

  1. Ships and air crafts owned and operated by normal residents between 2 or more countries. For example, planes operated by Air India between Russia and Japan are part of the domestic territory of India.
  2. Fishing, vessels, oil and natural gas, rigs operated by residents of the country in the international water where they have exclusive rights of operation.
  3. Embassies and military establishments of a country located abroad. For example, the Indian Embassy in Russia is a part of the domestic territory of India.

It will be understood better, if you attempt the following questions.

Question. Which of the following are under the domestic territory of India?

ParticularYes/NoReason
An Indian company in London.NoIt is a part of international territory.
Microsoft office in India.YesIt is a part of domestic territory.
Company in India owned by JapanYesIt is a part of domestic territory.
Office of Reliance Industry in USANoIt is a part of international territory.
Branch of foreign bank in IndiaYesIt is a part of domestic territory.
Embassy in Japan YesIt is a part of domestic territory.
Branch of SBI in JapanNoIt is a part of international territory.
Russian Embassy in IndiaNoIt is a part of international territory.
TATA rented its building to Google in AmericaNoIt is a part of international territory.

Note: Any foreign company in India is a part of the domestic territory, but any foreign embassy in India is not a part of a domestic territory.

Normal Residents

Normal residents mean any individual or any institution which resides or lives in the country and whose center of economic interest (income) lies in the country. So, who lives within the domestic territory and carries out the basic economic activities of earning, spending, savings, from that location.

There are 2 conditions to become a normal residents of the country:

  1. The stay in the country should be more than a year.
  2. The interest of staying in that country should be economic.

Exceptions on Normal Residents

Exceptions means who all are not consider normal residents:

  1. Foreign tourists and visitors who visit for medical treatment, holidays, study purposes, and sports.
  2. Foreign staff of the embassy, officials, and members of the army of a foreign country.
  3. International organizations like UNO, WHO, WTO, IMF, etc.
  4. An employee of international organization.
  5. Crew members of foreign vessels, commercial travelers, and seasonal workers provided they stay for less than a year.
  6. Border workers.

Question. Identify the following into normal residents of India:

ItemsYes/NoReason
Indian officials working in Indian Embassy in USAYesHe is a normal resident of India, he is Indian.
A Japanese tourist who stay for 2 monthsNoHe is not a normal resident of India, as he is a foreign tourist
Indian went to Pakistan for watching cricket matchYesHe is a normal resident of India.
Indian Employees working in RBIYesHe is a normal resident of India.
Foreign tourist visiting in India for a monthNoHe is a foreign tourist and not a normal resident.
Indian Muslim going outside India for HajYesHe is a normal resident of India.

Some Important Solved Questions

Thank You!

You can check more related posts:

  1. Real and Nominal GDP
  2. Gross and net investment
  3. National Income
  4. Stock and Flow Concept
  5. National Income Formulas
  6. Value-added Method
  7. Income Method
  8. Expenditure Method

I hope it was helpful.

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