Question

Two friends, Devanshi and Harshit, were discussing whether prize money from lottery winnings, should be included in India’s National income.

Harshit was of the view that it should be included, while Devanshi did not agree with him.

As their Economics teacher, guide them with correct treatment of the same with valid argument.

Answer 1

1. Lottery prizes are classified as “Windfall Gains.” They represent a simple transfer of wealth from one entity to another without any corresponding increase in the economy’s total output. No value addition occurs when a person wins a lottery
2. Devanshi is correct. Since winning a lottery does not involve providing labour, land, or capital for production, it is excluded from National Income calculations to avoid inflating the figures with non-productive transfers.