Class 12 Macro Economics Notes · CBSE
Domestic Territory and Normal Residents
Understanding economic territory beyond political borders and the concept of normal residents for national income accounting. CBSE Class 12 Macroeconomics notes
Last updated: 14 Jul 2026
Notes
What is Domestic Territory?
Domestic territory is not limited to political frontiers. It includes ships, aircraft, fishing vessels, and embassies operated by residents abroad — and excludes foreign embassies and international organisations within the country.
Included in Domestic Territory
Political frontiers of a country
The entire landmass, territorial waters, and airspace of India.
Ships and Aircraft operated by residents between countries
Air India planes flying between Delhi and Tokyo — part of India's domestic territory.
Fishing vessels, oil rigs in international waters with exclusive rights
Indian fishing boats operating in the Indian Ocean — part of India's domestic territory.
Embassies, consulates, military establishments abroad
Indian Embassy in Moscow — legally part of India's domestic territory.
Excluded from Domestic Territory
Foreign embassies, consulates, military establishments
American Embassy in Delhi — part of USA's domestic territory, not India's.
International organisations (UNO, WHO) within boundaries
UNO office in New York — not part of USA's domestic territory.
Normal Residents — Centre of Economic Interest
Who is NOT a Normal Resident? (Click each to expand)
| Aspect | Citizenship | Residentship |
|---|---|---|
| Nature | Legal concept | Economic concept |
| Based on | Place of birth or legal provisions | Ordinary residence (>1 year) + centre of economic interest |
| Example | Person born in India = Indian citizen | Chinese person in India >1 year = normal resident of India (but not citizen) |
| Key insight | NRI is citizen of India but resident of country where they live | A person can be citizen of one country and resident of another |
Domestic Product vs. National Product
| Aspect | Domestic Product | National Product |
|---|---|---|
| Based on | Domestic Territory | Normal Residents |
| Includes | Production by all units within domestic territory (residents + non-residents) | Production by normal residents (within + outside territory) |
| Excludes | Production by residents outside territory | Production by non-residents inside territory |
| Money value term | Domestic Income | National Income |
| Key question | Where was it produced? | Who produced it? |