What is NFIA in economics class 12

Share your love

I have explained what is NFIA in macroeconomics as per the syllabus of class 12 CBSE Board.

The topic that I would cover, are

  1. What is NFIA
  2. Definition of NFIA
  3. Components of NFIA
  4. Significance of NFIA in calculating the national income

Let’s understand what this NFIA term is

What is NFIA

In simple terms, it is an abbreviation of Net factor income from abroad. It is just the difference between the factor income received from the rest of the world and the factor income paid to the rest of the world.

Formula of NFIA

NFIA = Factor income received from rest of the world – Factor income paid to rest of the world

Net Factor income abroad = Net Compensation of employees + Net income from property and entrepreneurship + Net retained earnings

Definition of NFIA

It refers to the difference between factor income received from the rest of the world and factor income paid to the rest of the world.

What is factor income from abroad

It is the income earned by the normal residents of a country from the rest of the world in the form of wages, salaries, rent, interest, dividends, and retained earnings.

What is factor income to abroad.

It is the income paid to non-residents in the form of wages, salaries, rent, interest, dividends, and retained earnings for their factor services provided within the domestic territory of the country.

Components of NFIA

There are three components of NFIA.

Net Compensation of Employees:-

It refers to the difference between the wages and salaries earned by residents of India from the rest of the world and similar payments made to the non-resident workers earned in our domestic territory.

Net income from property and entrepreneurship:-

It refers to the difference between income from property and entrepreneurship (in the form of rent, interest, and dividend) received by residents of the country and similar payments made to the non-residents.

Net Retained Earnings:-

It refers to the difference between retained earnings of resident companies located abroad and retained earnings of non-resident companies located within the domestic territory of the country.

Importance of NFIA

NFIA is the component that is adjusted in domestic income to arrive at the National Income.

We can not determine National Income directly. First, we would calculate Domestic Income.

After adding the amount of NFIA to domestic income. We arrive at the National Income figure.

Share your love
Anurag Pathak
Anurag Pathak

Anurag Pathak is an academic teacher. He has been teaching Accountancy and Economics for CBSE students for the last 18 years. In his guidance, thousands of students have secured good marks in their board exams and legacy is still going on. You can subscribe his youtube channel and can download the Android & ios app for free lectures.

Articles: 3196

Leave a Reply

Your email address will not be published. Required fields are marked *

close

Ad Blocker Detected!

Our Website is made possible by displaying online advertisements to our visitors. Please consider supporting us and remove the AD - Blocker to read this article.

Refresh