The difference of export and import of goods and services is a part of domestic income. Here services mean non-factor services like banking, shipping, insurances etc. These services are different from the factors services such as labour, capital, etc.
Therefore, the factor income earned from abroad (compensation of employees, interest, profit, etc.) is not included in the export and import of these services.
Imported goods and non-factor services are used as intermediate goods and services for domestic product. Goods and non-factor services which are exported are part of domestic product.
Therefore, the difference of export and import of goods and non-factor services (this is also called as net export of import of goods and non-factor services) is included in the domestic product. For obtaining national product, net factor income earned from abroad should be added to domestic product or income.
ADVERTISEMENTS:
For estimating national income, it is very necessary to understand the distinction between net factor income earned from abroad and net export of goods and non-factor services.
In many books, net factor income earned from abroad has been indicated as the difference of export and import of goods and services; this is not correct.