“NFIA is difference between factor income received from abroad and factor income paid to abroad.”
What are Factor of production and what is factor payment we already studied. NFIA is all about Indian owned FoP located abroad and Foreigner owned FoP located in India. If Indian factor income is more which is coming from abroad, and Foreigner factor income from India is less, then NFIA will be in favor of India.
Best Example of Net Factor Income from Abroad (NFIAD) :
Indian resident Mr Ram ansari owns a house in UK, & receives monthly rent 1000 ₤ .
UK resident Mr John Ali owns a house in New delhi , for which he is receiving monthly rent inr 40000/- .
NFIA in this case will be 1000 ₤ (i.e 95000rs) – 40k = 55k ( in favor of INDIA ).
We know that ; Domestic Product +/- NFIA = National Product . In this case India’s national product will be MORE than it’s domestic product.
How ? Let’s say India domestic product = 100k, if we put value in above equation
100k + 55k(Add because NFIA is in favor of India) = 155k.
1) Learn various FoP (Factor of production)
2) Income of these FoP, owned by foreign nationals are put against each other, & remnant is our NFIA. If it is in negative, then it is against the country and National income decrease. If it is positive, then it is in favor of the country and national income will be more than domestic income.