 Dear learners, I will be starting video lessons for the course Microgonomics 1 of your MA first semester program. We begin this video series with the first minute of the course entitled National Income and Related Totals. This unit will have two videos and this is the first part of the video. As you know, national income is one of the most important concepts in all economic systems. The contents consist of estimates of significant aggregates and components for the economy and for major economic sectors or groupings of decision making units. It should be noted here that macroeconomics deals with economic and physiological forces, for example, aggregate employment, production, real income and the price level. However, national income is a crucial preparatory parameter for tackling macroeconomic issues or unemployment, inflation growth and economic welfare, that is quality of life. Thus, national income together with its related totals is important for decision makers in our economy to set light on the country's macroeconomic performance and to forecast events in the future. In this video, we shall try to look at the definitions and conceptual framings of domestic and national income. We shall also discuss various related totals of national income that are used to determine the progress of the economy. Basically, we will take it in the second part of the video. Now, domestic and national income. As stated earlier, national income serves as a background for economic appraisals and projections and it also makes possible more effective public and private decision making. It attempts to measure how much economic activity took place during a specified period of time, usually a year. However, income of a country may be stated in the context of its territory and its normal residence. These two totals are very important. Let us now attempt to define domestic and national income and also try to derive conceptual explanations underpinning them. We have already stated that income of a country may be explained from two perspectives, its domestic territory and its normal residence. Here the context between the two terms is very important. Domestic income can be defined as the sum total of factor income generated by all the production units located within the domestic territory of a country during an accounting period, usually a year as you all know. Here we should note that factor incomes are expected to be generated within a defined territory irrespective of the statuses of the product foreigners, citizens or foreigners. Within a defined territory, it is expected that both nationals and non-nationals reside. By implication, domestic income includes factor incomes of both nationals and non-nationals residing within a particular domestic territory. For instance, there are many foreign companies and banks which operate within domestic territory of India. This means incomes generated by these foreign companies and banks are included in India's domestic income. Therefore, the conceptualization of domestic income is territorial in India, sir, since it is defined in particular reference to domestic territory. We should clearly note that domestic income excludes factor income from abroad, whereas national income is simply defined as the sum total of factor incomes earned by normal residents of a country in a particular accounting period. It is important to note here that the national income contains factor incomes earned by normal residents within and outside that country. National income is therefore framed along the lines of productive efforts of normal residents. Overall, incomes generated by both citizens, that is residents and foreigners, that is non-residents, within domestic territory of a country is referred to as domestic income, while incomes generated by citizens, normal residents within and outside a particular country is referred to as national income. The major difference between the two is net factor income from abroad, which is added to domestic income to get national income. That is, national income is equal to domestic income plus net factor income from abroad. Now, let us know some important terms here, two importance basically, net factor income and normal residents. Now, net factor income is the difference between the aggregate income that a particular county's citizens and companies earned abroad and the aggregate amount that foreign citizens and overseas companies earned in that country. Normal resident, it means a resident is said to be a person or institution who ordinarily resides in a country and whose center of economic interest lies in that country. He is called a normal resident, since he normally lives in the country of his economic interest, the period of stay should be at least one year or more. Here, center of economic interest implies two things. Number A, the resident lives or is located within the domestic territory and B, the resident carries out basic economic activities of earnings, spending and accumulation from that location. Certain items are not included under the category of normal residents. First, foreign tourists and visitors who visit a country for recreation, holidays, medical treatment, studies, post-conferences, etc. Second, foreign staff of embassies, officials, diplomats and members of the armed forces of a foreign country located in the given country. Third, international organizations like EVNO, WHO, etc. are not considered as normal residents of the country in which they operate. They are treated as normal residents of international area. Fourth, employees of international organizations are considered as residents of the countries to which they belong and not of the international area. For example, an American working in EVNO office located in India will be treated as normal residents of America. However, if the employees are working for more than one year in such international institutions, then they become the normal residents of a country in which such institutions are located. It means, in the given example, if the American is working in EVNO office in India for more than one year, then he will be treated as normal resident of India. Fifth, crew members of foreign vessels, commercial travellers and seasonal workers provided their stays less than one year. And sixth, border workers who live near the international border and cross the border on a regular basis to work in the other country. They are treated as normal residents of the country where they live and not where they work. Now, let us briefly discuss some of the important aspects relating to another important concept, domestic territory. In layman's terms, domestic territory means the political frontiers of a country. In economics, the term has a wider connotation. However, for the purpose of national income accounting, it is used in a wider sense, okay? In addition to political frontiers, domestic territory also includes, first, shifts in aircraft owned and operated by normal residents between two or more countries. For example, planes operated by Air India between Russia and Japan are part of the domestic territory of India. Similarly, planes operated by Singapore Airways between India and Japan are a part of the domestic territory of Singapore. Fishing vessels, oil and natural gas rigs, and floating platforms operated by the residents of a country in the international waters where they have exclusive rights of operation. For example, fishing boats operated by Indian fishermen in international waters of Indian Ocean will be considered a part of domestic territory of India. Embassies, consulates and military establishments of a country located abroad. For example, Indian embassy in Russia is a part of the domestic territory of India. Consulate is an office or building used by a consul and officer commission by government to decide in a foreign country to promote the interest of the country to which he belongs. Now, important exclusions from the term domestic territory are, first, embassies, consulates and military establishments of a foreign country. For example, Japan's embassy in India is a part of the domestic territory of Japan. Second, international organizations like UNO, WHO, etc. located within the geographical boundaries of a country. Interestingly, according to the United Nations, economic territory or domestic territory is the geographical territory administered by a government within whose persons, goods and capital circulate freely. We conclude the first part of Unit 1 here. In the next video, we shall cover the remaining portion of the Unit 1. In that video, we shall take up national income and its related totals for discussion. Thank you.