How to calculate NFIA

NFIA is significant to differentiate between ‘Domestic Income’ and ‘National Income'

In practical estimates, domestic income is estimated first and then, National Income is derived from Domestic Income in the following manner:

National Income:

= Domestic Income

+ Factor income from abroad (due to contribution of normal residents to production outside the economic territory)

– Factor income to abroad (due to contribution of non-residents to production inside the economic territory)

The difference of Factor income from abroad and Factor income to abroad is termed as “Net factor income from abroad” or popularly abbreviated as NFIA.

So, National Income = Domestic Income + NFIA

NFIA can be Positive, Negative or Zero:

1. NFIA is Positive when income earned from abroad is more than income paid to abroad.

2. NFIA is Negative when income earned from abroad is less than income paid to abroad.

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3. NFIA is Zero when income earned from abroad is equal to income paid to abroad.