Question
Briefly explain the following basic concepts related to NI:
Normal Residents
Solution
Resident, i.e. Normal Resident
A resident is said to be a person (or an institution) who ordinarily resides in a country and whose centre 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. Thus (1) staying for more than a year, and (2) having economic interest are the two normal conditions for becoming a normal resident. It needs to be kept in mind that national income is the sum total of income of only normal residents of a country in a year. Here following points needs to be noted.
(i) Normal residents cover both individuals and institutions.
(ii) Normal residents include both citizens and non-citizens i.e. foreigners who reside in a country for more than a year and have economic interest in that country.
(iii) International bodies (like World Bank, World Health Organisation or International Monetary Fund) are not considered residents of the country in which these organisations operate but are treated as residents of international territory. However, the staff of these bodies are treated as normal residents of the country in which the international body operates. For example, international body like World Health Organisation located in India is not normal resident of India but Americans working in its office for more than a year will be treated as normal residents of India.
(iv) Local employees working in foreign embassies located in their country are treated as normal residents. For example, Indians working in U.S.A. embassy located in India are residents of India.
(v) Workers from across the border who cross border in the morning to work in the other country (like Indians who work in Nepal) and return in the evening are not residents of the country where they work.
For example normal residents of India include
(i) citizens (and institutions) of India.
(ii) citizens of other countries (i.e. non-citizens) who normally reside in India for more than a year and whose centre of economic interest lies in India.
(iii) Citizens of India working in (a) international bodies (like I.M.F.), (b) foreign bodies (like banks, enterprises) operating in India and (c) foreign embassies located in India.
A resident is said to be a person (or an institution) who ordinarily resides in a country and whose centre 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. Thus (1) staying for more than a year, and (2) having economic interest are the two normal conditions for becoming a normal resident. It needs to be kept in mind that national income is the sum total of income of only normal residents of a country in a year. Here following points needs to be noted.
(i) Normal residents cover both individuals and institutions.
(ii) Normal residents include both citizens and non-citizens i.e. foreigners who reside in a country for more than a year and have economic interest in that country.
(iii) International bodies (like World Bank, World Health Organisation or International Monetary Fund) are not considered residents of the country in which these organisations operate but are treated as residents of international territory. However, the staff of these bodies are treated as normal residents of the country in which the international body operates. For example, international body like World Health Organisation located in India is not normal resident of India but Americans working in its office for more than a year will be treated as normal residents of India.
(iv) Local employees working in foreign embassies located in their country are treated as normal residents. For example, Indians working in U.S.A. embassy located in India are residents of India.
(v) Workers from across the border who cross border in the morning to work in the other country (like Indians who work in Nepal) and return in the evening are not residents of the country where they work.
For example normal residents of India include
(i) citizens (and institutions) of India.
(ii) citizens of other countries (i.e. non-citizens) who normally reside in India for more than a year and whose centre of economic interest lies in India.
(iii) Citizens of India working in (a) international bodies (like I.M.F.), (b) foreign bodies (like banks, enterprises) operating in India and (c) foreign embassies located in India.
