Sansad TV Perspective: India's Per Capita Income Doubles

In the series Sansad TV Perspective, we bring you an analysis of the discussion featured on the insightful programme ‘Perspective’ on Sansad TV, on various important topics affecting India and also the world. This analysis will help you immensely for the IAS exam, especially the mains exam, where a well-rounded understanding of topics is a prerequisite for writing answers that fetch good marks.

In this article, we feature the discussion on the topic: ‘India’s Per Capita Income Doubles’.

Anchor: Teena Jha

Guests:

1. Shubhomoy Bhattacharjee, Consulting Editor, The Business Standard
2. Subhash Chandra Pandey, Former Special and Financial Advisor, Ministry of Commerce and Industry
3. Dr. A.K. Sharan, Professor and Dean, Manav Rachna International School of Research and Study

Context: An increase in India’s per capita income was reported.

Highlights of the discussion:

• Introduction
• Per Capita Income and its significance
• Associated Concerns
• Way Ahead

Introduction:

• India’s per capita income has doubled to Rs 1,72,000 in nominal terms since 2014-15. Read more on this development here.
•  According to National Statistics Office (NSO) data, the per capita income in terms of net national income, in current prices, stood at Rs 1,72,000 in 2022-23 with a growth rate of 15.8% over the previous year. This would be nearly double ₹86,647 in 2014-15. 
• Per capita income at the current prices was estimated at Rs1,27,065 and Rs 1,48,524 respectively for the years 2020-21 and 2021-22. This indicates that there has been a consistent rise in per capita income.

Also read: New Social Media Rules

Per Capita Income and its Significance:

• Per capita income (PCI) is an indicator of economic development. It is the income earned by each person in the economy. It is calculated by dividing the total income of the country by its population.
• Per capita income in real terms implies that the impact of inflation has been netted out. This means that the comparison can be made from different time periods, thereby reducing the complexity.
• It should be noted that it is not a very useful indicator in the initial stages as it comes with a time lag and thus various countries don’t use it in their economy. Even in India, its use is debated.
• However, it does reflect an increasing or decreasing trend or the movement of the economy to some extent.
• It is also highlighted that as there is no Consumption Expenditure Survey, micro-level assessment of changes in people’s life cannot be well interpreted from Per Capita Income.
• Per capita income still provides direction in which the economy is moving.
• The per capita income along with the upcoming Consumer Expenditure Survey and Census data will provide a rich source of data for understanding the Indian Economy.
• It is suggested that per capita income would be more realistic at constant prices.
• Even if all caveats are taken into consideration, the figure reflects that a large section of people (nearly 1.4 billion) will have a higher level of disposable income. It will also have a multiplier effect on living standards.
• Moreover, the figure can give direction to policy. It will create space for new policies and challenge policymakers to come up with smart responses.
• It is not that the rich are becoming richer and the poor are becoming poorer. It is just that every section is moving ahead but at a different pace.
• PCI has been hijacked by inequality issues.

Factors behind the increase in Per Capita Income:

• It has increased due to the rise in the prices of goods and services.
• It is also affected by the rise in population. In 2014-15 the population was around 126.7 crore which rose to approximately 138.3 crores in 2022-23.
• Many policy measures like Jal Jeevan Mission, Electricity, and Direct Benefit Transfer have been taken. 
• Efforts are also made to boost manufacturing activities through ease of doing business and Production Linked Incentive Schemes.
• Technology has also been an enabler and has plugged the loopholes in economic growth.

Associated concerns with per capita income:

• National Statistics Office that has published the per capita income is a government agency and it is argued that it has released the figure with some due precautions.
• The inflation rate has been kept at an average of 4%.
• Per Capita Income also covers non-earning members of the population like children. It is thus considered a fallacy in calculations.
• There is an element of unequal distribution or inequity which is not reflected in the per capita income.
• As the census results are not yet out, the population estimate might be extrapolated.
• It is also argued that as the world is reeling under high inflation, the increase in income that is projected is much less in actual terms.
• The consumption basket for the different segments of the population is different and thus policy responses in infrastructure, banking, and FMCG should be diverse.
• It is important to focus on relevant challenges like employment given the other facets of economic life.
• Many economists suggest that per capita income conceals the disparity and outliers like extremely rich and extremely poor people.
• Economic growth with redistributive justice is a persistent concern in India since independence.
• Earlier there was a concept of a trickle-down theory which doesn’t work in the present scenario.

Also read: National Statistical Office (NSSO)

Way Ahead:

• Inequality or issues associated with equality should be understood from other indicators like Gini Coefficient, as focusing too much on the inequality aspect might force the state to resort to freebies.
• It is important to focus on the aspirations of the young population like skill development and employment opportunities.
• Equitable access should be provided to education and health aspects.
• Increasing emphasis should be given to manufacturing and infrastructure as they have a multiplier effect and can boost and distribute income.
• It is important to diversify the dependence from agriculture to the manufacturing and service sectors.
• Investment in infrastructure like logistics, railways, and highways should be done.
• Efforts should also be made to reduce the existing divide.

Read all the previous Sansad TV Perspective articles in the link.

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