Income in India

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World map showing the Gini coefficient, a measure of income inequality.

India's per capita income (nominal) is $ 1219, ranked 142nd in the world,[1] while its per capita purchasing power parity (PPP) of US $3,608 is ranked 129th.[2] It is estimated that India's Per Capita Income will register an average growth rate of 13% during 2011-2012 so as to reach $ 4,200 by 2020. In the year 2020 India's real GDP is projected to be at $5 trillion, and per capita Nominal GDP at $ 3,650. India's per capita purchasing power parity (PPP) will be at $ 12,800 in the year 2020. States of India have large disparities. One of the critical problems facing India's economy is the sharp and growing regional variations among India's different states and territories in terms of per capita income, poverty, availability of infrastructure and socio-economic development.[3] Although income inequality in India is relatively small (Gini coefficient: 32.5 in year 1999- 2000);[4] India's nominal Gini index rose to 36.8 in 2005, while real Gini after tax remained nearly flat at 32.6.[5]

Despite significant economic progress, a quarter of the nation's population earns less than the government-specified poverty threshold of $0.40/day. [6][dubious ] 27.5% of the population was living below the poverty line in 2004–2005.[7]


Reforming cumbersome regulatory procedures, improving rural connectivity, establishing law and order, creating a stable platform for natural resource investment that balances business interests with social concerns, and providing rural finance are important.

— World Bank: India Country Overview 2008[8]

Between 1999 and 2008, the annualized growth rates for Maharashtra (9.0%)[9] Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%).[10] By 2010, economically backward states start to catch up with developed states with Bihar with an impressive 11 percent growth rate. This is said to be due to better governance.[11]

According to a World Bank paper Development Policy Review, $1 a day poverty rates in rural Orissa (43%) and rural Bihar (40%) are some of the highest in the world.[12] Seven low-income states - Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh - are home to more than half of India's population.[13] Bihar's 80 million people are by far the poorest in India.

On the other hand, rural Haryana (5.7%) and rural Punjab (2.4%) compare well with middle-income countries.[12][14][15]

The Economic Survey of India 2007 by OECD concluded:

At the state level, economic performance is much better in states with a relatively liberal regulatory environment than in the relatively more restrictive states".[16]

The analysis of this report suggests that the differences in economic performance across states are associated with the extent to which states have introduced market-oriented reforms. Thus, further reforms on these lines, complemented with measures to improve infrastructure, education and basic services, would increase the potential for growth outside of agriculture and thus boost better-paid employment, which is a key to sharing the fruits of growth and lowering poverty.[16]

States by GDP per capita[edit]

Andhra Pradesh, Karnataka,West Bengal, Haryana, Maharashtra, Kerala, Punjab, Gujarat and Tamil Nadu have a higher per capita GDP among larger states. Small Delhi and Goa top the list.

Rural-urban gap[edit]

Like in other countries, cities provide a better standard of living.

Towns and cities make more than two thirds of the Indian GDP, even though less than a third of the population live in them.[16]

India has a high rate of migration from rural areas to urban cities. A major reason for the massive migration to cities was the Partition of India. More than half of the refugees from Pakistan settled In urban areas such as Delhi.[17] It is estimated that up to 590 million people, or 40% of the Indian Population will be living in cities by 2030, much higher than the current 28%. Also, it is estimated that six states, including West Bengal, Tamil Nadu, Gujarat, Maharashtra, Karnataka and Punjab will have more than half of their total population living in Urban areas by 2030.[18]

In India, urban areas have seen a much higher growth rate as compared to rural areas. Despite up to three-fourths of the population living in rural areas, rural areas contribute to only one-third of the national income.The main reason for rural India's poor performance in terms of income is the fact that rural India is mostly dependent on agriculture. The agriculture sector in India grew at a rate of only 1.6% in 2008-09,[19] while the Indian Economy grew at a rate of 6.7%, despite the 2008 Financial Crisis.[20] An extremely slow rate of growth in the agriculture sector of the Indian economy has serious implications for the rural-urban divide, both in terms of income and GDP. Some estimates say that that the average income of a person living in an urban area may be up to 4 times higher than that of a person living in a rural area.[21] The rising levels of urbanization in India is a major reason for the rising levels of income disparity in the country.

Bridging the Urban-Rural Gap

In India, the government has taken steps to bridge the urban-rural gap. This includes setting up the Council for Advancement of People's Action and Rural Technology (CAPART) by the Ministry of Rural Development.[22] CAPART helps in providing assistance to various organizations which help in developmental activities.[23] There is a constantly widening rift between rural and urban India, not only in terms of income, but other social measures. There is an urgent need to strengthen the agriculture sector in India, bring about reforms in labour laws, and provide education.[24]

See also[edit]

References[edit]

  1. ^ "Report for Selected Countries and Subjects". Imf.org. 2006-09-14. Retrieved 2010-08-12. 
  2. ^ "Report for Selected Countries and Subjects". Imf.org. 2006-09-14. Retrieved 2010-08-12. 
  3. ^ Datt, Ruddar & Sundharam, K.P.M. "27". Indian Economy. pp. 471–472. 
  4. ^ "Fact Sheet: Gini Coefficient" (PDF). Source: The World Bank (2004) and Census and Statistics Department (2002). Legislative Council Secretariat Hong Kong. Retrieved 2007-08-01. "Note: The Gini coefficient in this datasheet is calculated on a scale of 0 to 1 and not 0 to 100. Hence, on a scale of 100 India's Gini coefficient (1999-2000) was 32.5 rather than 3.25" 
  5. ^ Gehring, Keith and Kulkarni, Kishore G (2008). "Economic growth and income inequality in India". Journal of Management 6 (2): 1–15. 
  6. ^ "Planning Commission further lowers poverty line to Rs 28/day". 
  7. ^ Poverty estimates for 2004-05, Planning commission, Government of India, March 2007.
  8. ^ "India Country Overview 2008". World Bank. 2008. 
  9. ^ "Maharashtra poised for 9 percent growth in 2007-08". Thaindian.com. 2008-03-18. Retrieved 2010-08-12. 
  10. ^ "A special report on India: Ruled by Lakshmi". The Economist. 11 December 2008. 
  11. ^ At 11.03 per cent, Bihar growth rate only a step behind Gujarat
  12. ^ a b "Development Policy Review". World Bank. 
  13. ^ "Country Strategy for India (CAS) 2009-2012". World Bank. 
  14. ^ Sachs, D. Jeffrey; Bajpai, Nirupam and Ramiah, Ananthi (2002). Understanding Regional Economic Growth in India (PDF). Working paper 88. Archived from the original on 2007-07-01. 
  15. ^ Kurian, N.J. "Regional disparities in india". Retrieved 2005-08-06. 
  16. ^ a b c "Economic survey of India 2007: Policy Brief". OECD. 
  17. ^ "The Rural-Urban Divide in India". 
  18. ^ "Urban India 2030". 
  19. ^ "Agriculture Growth Rate". 
  20. ^ "India's Growth rate in 2008". 
  21. ^ "The Great Indian Divide". 
  22. ^ "Bridging The Divide". 
  23. ^ "CAPART organization". 
  24. ^ "Measures to Bridge the Gap".