Explanation:

Statement 3 is incorrect: Interest on External Loans (and not internal loans) constitute Net Factor Income from Abroad.  Statement 4 is incorrect: External Grants constitute Net Factor Income from Abroad. Grants to states constitute Revenue Expenditure of government. Supplementary notes: Gross National Product (GNP)  GNP refers to the GDP of a country added with its ‘Net Factor Income from abroad’. Here, the trans-boundary economic activities of an economy are also taken into account.  ‘Net Factor Income from abroad’ includes the following:  Private Remittances: The net outcome of the money which in fl ows and out fl ows on account of the ‘private transfers’ by Indian nationals working outside of India (to India) and the foreign nationals working in India (to their home countries).  Interest on External Loans: The net outcome on the front of the interest payments, i.e., the balance of in fl ow (on the money lent out by the economy) and out fl ow (on the money borrowed by the economy) of external interests.  External Grants: The net outcome of the external grants i.e., the balance of such grants which fl ow to and from India.  Ultimately, the balance of all the three components of the ‘Net Factor Income from Abroad’ segment may turn out to be positive or negative. In India’s case, it has always been negative (due to heavy out fl ows on account of trade de fi cits and interest payments on foreign loans). This means that India’s GNP is always lower than its GDP.