What is a Normal Resident of a country in Macroeconomics class 12 CBSE Board

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Normal Resident is the important topic of National Income chapter of Macroeconomics Class 12 CBSE Board. An individual production activities are included/excluded in national income on the basis of his status as normal resident or non-resident.

An MCQ base question can also come in board exam on this topic too.

So, with examination point of view this topic is very very important.

Note:- Discussion to this topic is only restricted to CBSE board examination Class 12

Now first learn the exact definition given in various author’s book.

Definition of Resident in S.K Aggarwal book

“A resident, whether a person or an institution, is one whose centre of economic interest lies in the economic territory of the country in which he lives or is located.”

Book, S.K Aggarwal

Important Points:-

Meaning of Centre of Economic Interest:-

  1. The resident lives or is located within the economic territory
  2. The resident carries out the basic economic activities from that location itself.

Definition of Normal Resident in Sandeep Garg Book

“Normal resident of a country refers to an individual or an institution who ordinarily resides in the country and whose centre of economic interest also lies in that country.”

Book, Sandeep Garg

Normal resident includes both, individuals and institutions.

Here ‘Centre of economic interest implies two things:

  • The resident lives or is located within the Domestic Territory; and
  • The resident carries out basic economic activities or earnings, spending and accumulation from that location itself.

Definition of Normal Residents in TR Jain Book

“A normal resident is said to be one (i) who ordinarily resides in the country concerned, and (ii) whose centre of economic interest lies in that country. Here, not these observations carefully.”

Book, TR Jain

  1. A person residing in a country for a period of one year (or more) is taken as ‘ordinarily residing’ in that country. This person may or may not be a citizen of that country.
  2. A person is said t have his economic interest in a country when he carries out all his economic activities such as production, consumption, or investment in that country.

Note:- Above definitions from reference book has been given same as given in the books. I have not modified even a single words.

What is Normal Residents in Simple Words

“In simple words, a Normal resident of a country is any individual or institution who ordinarily lives in the country and carries out basic economic activities such as earnings, spending, and investment within the domestic territory of the country in which he lives.”

Difference between Resident and Citizen

ResidentCitizen (National)
A person is treated resident of a country on the basis of the economic criterion stated aboveA person becomes the Citizen of a country if he was born in the country or on the basis of some other legal criterion.
It is not necessary that a resident must also be the national of that country. Even a foreigner can be a resident of a country.A Citizen may or may not be a resident of the country where he was born

For example, there are thousands of Indian National have settled in different other countries such as America, Australia, England, etc.

They are however citizens of India but are not residents. Because their economic interest does not lie in India’s economic territory. They earn, spend, and invest in the country in which they reside. That’s why they are called Non-Resident Indians (NRI). But they continue to remain Indian Citizens.

Before we go through the examples of Normal Residents. You must have a command over the ‘Economic (Domestic) territory concept’ I have discussed this topic thoroughly in the below lecture.

Read Here:- What is Economic Territory in National Income Chapter Class 12

Following are not included under the category of Normal residents

Following are the examples of non-residents:-

1. International Organizations:-

There are certain organizations such as World Bank, WHO, IMF, ILO, etc. These are treated as residents of the International area not of the country in which they are situated. So, WHO organizations situated in India are treated as non-residents of India.

2. Employees of International organizations:-

If an individual working in any International organizations. He is considered as normal resident of a country they belong and not of the ‘international area’.

3. Foreign Tourists and visitors:-

Travelers, visiting a country for studies, medical treatment, recreation, take part in sports, cultural events are treated as non-residents they are visiting.

4. Foreign Staff:-

Foreign staff of embassies and members of foreign armed forces located in the given country are treated as non-residents.

5. Crew Members:-

Crew members of foreign ships, aircrafts etc. are treated as non-residents.

6. Workers from across the border:-

The workers who crosses the international area to work in the given country are treated as residents of the country where they live and not the resident of the country where they work.

Examples of Normal Residents of India

  1. Indian officials working in the Indian Embassy in the USA. (Rule 4 is applied from the above list)
  2. Indian going to Pakistan for watching the cricket match. (Rule 3 is applied from the above list)
  3. Indian working in the UNO office, located in America for less than 1 year. (Rule 2 is applied from the above list)
  4. Indian employees working in WHO, located in India. (Rule 2 is applied from the above list)
  5. Indian Muslims going for the Haj Pilgrimage. (Rule 3 is applied from the above list)
  6. Indian working in foreign embassies in India. (Rule 4 is applied from the above list)
  7. Indian employed in world Health organization located in India. (Rule 2 is applied from the above list)
  8. Local People working in the office of the International Monetary Fund in India. (Rule 2)
  9. Ambassador for India in the rest of the world. (Rule 4)
  10. The foreign citizens living in India for a period of more than one year (other than those for studies or medical treatment. (
  11. Indian workers employed in the power projects of Nepal on daily wages and crossing into Indian Territory every week. (Rule

Examples of Non-residents of India

  1. A Japanese tourist who stays in India for 2 Months.
  2. Foreign tourists visiting India for a month to see the Taj Mahal.
  3. An American tourist staying in India.
  4. Foreigners working in Indian embassies in Canada and Japan.
  5. Foreigners working in World Health Organisation located in India.
  6. The German working as Director of the Office of International Monetary Fund located in India.
  7. Ambassador in India from the rest of the world.
  8. The foreign technical experts working in India for a period of less than one year.

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