Giving valid reasons, explain how the following would be treated while estimating domestic income ? (i) Payment made by a Japanese tourist for goods purchased in India. (ii) Broker's commission on the sale of second hand goods. "Gross Domestic Product (GDP) as an indicator of welfare loses its significance if the distribution of income turns unequal." Justify the given statement with valid reason.

Question

Accepted Answer

(i) Payment made by a Japanese tourist for goods purchased in India: This is included in domestic income as it represents expenditure on goods produced within India's domestic territory. As per the chapter resources, goods and services purchased by foreign tourists are included in domestic income as they are exports produced within the domestic territory.

(ii) Broker's commission on sale of second-hand goods: This is included in domestic income as it is income earned for rendering productive services. The broker's service is a current productive activity even though the underlying goods are second-hand. As stated in the chapter, commission or brokerage on sale of second-hand goods is included as it is a productive service.