India Per Capita Income in Dollars
(All the updates, effective Jul2024, on per capita income in US dollars, are available in Indian Economy Data Bank)
According
to World Bank data for 2022, India is the fifth largest economy in the world by
gross domestic product (GDP). But in terms of per capita income, it is at
around 140th rank, indicating India is at the bottom of the pile on
a per capita basis.
Per capita income is calculated by dividing a nation's population by its total national income.
India
became world’s most populous nation this year, surpassing China. Our population is considered as our
strength. But in terms of income inequality, it can be described as our
weakness because India’s potential does not get reflected when one compares
indicators based on per capita income.
1.
India per capita income
India’s
per capita gross national income in 2022 is 2,380 US dollars. Gross national
income (GNI) is the income earned by a nation’s residents irrespective of where it is
earned. It can be calculated by adding income from foreign countries to country’s
gross domestic product (GDP).
Comparatively,
the world’s average per capita income is USD 12,804 in 2022. So, India's per capita income is less than 20 percent of world's. The
data are from World Bank’s World Development Indicators updated as on 26Oct2023.
Though
India is world’s fifth largest economy, its per capita income gets depressed
due to its population. Indian rupee’s depreciation against the US dollar also
depresses India’s per capita income expressed in US dollars.
The
official data used here is per capita GNI or gross national income. But the term
‘per capita income’ will be used here for simplicity.
Table 1: India per capita income since 2000:
As
show in table 1 above, India’s per capita income in US dollars increased from
USD 440 in 2000 to USD 2,380 in 2022, with an absolute growth of 441 percent
and an annualised growth rate of 7.98 percent – which is quite impressive in a
period of 22 years.
From
the table 1, one could observe the fastest growing years for India after 2000
are 2004, 2005, 2007, 2011, 2009 and 2006 with a year-on-year growth of 17.6,
16.7, 16.7, 12.4, 12.1 and 11.4 percent respectively.
The growth of 13.2
percent in 2021 is an anomaly because 2020 saw a severe decline of 8.7 percent in
per capita income in dollars due to draconian COVID-19 lockdowns imposed by the
Indian federal government.
(blog continues below)
------------------------------Related blogs:
Slowest growth in India's real per capita income
Why is India Falling Behind Bangladesh?
India Second Quarter GDP 30Nov2021
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2.
India per capita income growth in five-year intervals
To
normalise for year-on-year differences, let us see how the growth occurred over
a period of five-year intervals from 1962 to 2022. The World Bank data for
India’s per capita income are available from 1962 onward.
Table
2: India per capita growth 1962 to 2022 (5-year intervals):
As
shown in Table 2, the fastest growth periods, in five-year intervals, in per capita income in dollars
are: 2002 to 2007 with an absolute growth of 97.8 percent in five years; 2007
to 2012 with an absolute growth of 61.5 percent and 1972 to 1977 with an
absolute growth of 58.3 percent.
Incidentally,
Manmohan Singh is India’s prime minister between 2004 and 2014 and Indira
Gandhi was the country’s prime minister between 1972 to 1977 (for most of the
time).
Between 1987 and 1992, India's per capita income declined by 2.9 percent due to a combination of listless economic growth and devaluation and depreciation of Indian rupee against the US dollar.
But in the past 10 years, the 5-year absolute growth rates are low compared to 2002-2012 periods. Between 2012 and 2017, India's per capita income grew by just 22.4 percent (total five years) and it improved to 32.2 percent (total five years) between 2017 and 2022.
Indian rupee devaluation:
The
numbers after 1991 are not strictly comparable with those before 1991, because
there was a regime change in 1991 not only for India’s dollar-rupee exchange rate but also
for the entire Indian economy.
Indian rupee was devalued in two stages in 1991
with a cumulative devaluation of 18 percent in US dollar terms. Dollar - rupee exchange
rate was not market-determined before 1991.
Since
01Mar1992, Reserve Bank of India, India’s central bank, introduced a dual
exchange rate system called Liberalised Exchange Rate Management System (LERMS).
It was replaced by a unified exchange rate system on 27Feb1993 to make the
exchange rate market-determined.
India's current exchange rate system is not
full float, but often dubbed as 'managed float.'
3.
Comparison with comparable countries
Most
of the things in life are relative. Let us examine how India stacks up in the
world in terms of per capita income.
Comparable
countries, like, BRICS, G20 and others are included in table 3 below to see how
India performs. As per World Bank’s 2022 data about per capita GNI of October
2023, India is a lower middle income country.
Table 3: Comparison with comparable nations:
The
World Bank categorised India as a lower middle income country. As can be seen
from table 3 above, India’s per capita income is the lowest not only among the
G20 but also among BRICS countries.
It may not advisable to compare a lower middle income nation with high income nations, but even
among lower middle income countries, India's income per head is lower than that of Bangladesh,
Egypt and Vietnam.
The per capita incomes of other BRICS nations, Brazil, Russia, China and South Africa are much higher than that of India (table 3 above).
Among upper middle income category, Malayasia, Libya, Colombia, Botswana and Iraq have per capita incomes far higher than that of India.
Countries, like, Kenya, Nigeria, Nicaragua and Burma (all lower middle income nations) have incomes lower than that of India, as per World Bank's 2022 data.
4. Summary
India may be the world's fifth largest economy but its ranking in per capita income is quite low -- even lower among comparable countries, like, Bangladesh, Egypt, Vietnam, South Africa and Russia.
In 2022, India's per capita income is USD 2,380, which is much lower than the world average of USD 12,804.
The
current narrative is crossing the USD-2,000 per capita income threshold is a
turning point for countries in the past and the same can be extrapolated to
India. India surpassed this threshold once in 2019 and again in 2021 – after having
down below the level in 2020.
The
expectation has gained ground in recent years so that India can leapfrog to USD
5 trillion. To put it mildly, this is a narrative propagated by some people to suit their interests.
When it comes to growth in per capita income and overall economic growth, the record of current Indian federal government is quite tepid, despite the hype and propaganda.
This
is not an attempt to analyse India’s prospects on a single metric like per
capita income but to put things in the perspective and throw some light on the
income disparity that has been bedeviling the country for several years.
The income inequality has worsened since the COVID-19 outbreak, with economists and experts talking of a K-shaped recovery in the country in the past three years.
Hundreds
of millions of Indians are still in poverty – this is buttressed by the fact
that the Indian federal government recently decided to extend its
free food grains programme to more than 800 million Indians by a period of five
years.
It
is fair to argue per capita GNI PPP is more relevant from India's viewpoint (we
can discuss this another time in more detail) than per capita GNI merely. GNI
PPP is GNI based on purchasing power parity, which adjusts for the purchasing
power relatively.
For
example, India’s per capita income may be low, but the purchasing power of Rs 100
is much higher in India compared to say, in the United States. To put
differently, an average meal may be available for just Rs 100 in India; the same
meal may cost more than Rs 400 or Rs 450 in the US.
It
is hoped governments in India will make sincere efforts to economically lift millions of
Indians still languishing in poverty and bring down the income equality in a
meaningful way in the next decade.
- - -
------------------------------
P.S. dated 29Nov2023: Food security:
PIB press release dated 29Nov2023: Free Foodgrains for 81.35 crore beneficiaries for five years: Cabinet Decision
Historic decision for Food and Nutrition Security : Centre to spend approximately Rs. 11.80 lakh crore in the next 5 years on food subsidy under PMGKAY
Historic decision for Food and Nutrition Security : Centre to spend approximately Rs. 11.80 lakh crore in the next 5 years on food subsidy under PMGKAY
------------------------------
References:
World Bank World Development Indicators (updated 26Oct2023)
World Bank India per capita GNI (chart available)
RBIcrisis and reforms 1991 to 2000 - chronology of events - Indian rupee devaluation in 1991 / LERMS / unified exchange rate
RBIpress release 27Feb1993 – Unified exchange rate from LERMS
PIBcircular 15Nov2023 - India providing food grains
Macrotrends India per capita GNI (graph available) (India's historical data for every year is available from 1962 to 2022; and so is data about comparable countries' per capita GNI)
Additional
Data:
India per capita GNI (in current US dollars) - starting from 1965 to 2020 in five-year intervals to compare how that data stands over five-year intervals:
G20
– Group of 20 countries
BRICS
– group of Brazil, Russia, India, China and South Africa
------------------------------
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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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