Gross Domestic Product (GDP) per capita is the abbreviation for Gross Domestic Product (GDP) per capita (per person). It is calculated by simply dividing total GDP (see definition of GDP) by the population. In international markets, per capita GDP is usually stated in local current currency, local constant currency, or a standard unit of currency, such as the US dollar (USD).
GDP per capita is a key metric of economic success and a helpful unit for comparing average living standards and economic well-being across countries. However, GDP per capita is not a measure of personal income, and it has certain well-known flaws when used for cross-country comparisons. GDP per capita, in particular, does not account for a country’s income distribution. Furthermore, cross-country comparisons based on the US dollar might be skewed by exchange rate movements and don’t always reflect the purchasing power of the countries under consideration.
For the last five years, the table below illustrates GDP per capita in current US dollars (USD) by country.
Are you looking for a forecast? The FocusEconomics Consensus Forecasts for each country cover over 30 macroeconomic indicators over a 5-year projection period, as well as quarterly forecasts for the most important economic variables. Find out more.
Is average income equal to per capita GDP?
The government issued a flood of statistics this week. GDP growth in 2012-13 is expected to be better than 7.2 percent, but not near to the potential of 8.6 percent, according to the government. In 2010-11, per capita income surpassed Rs 50,000 for the first time. What are your thoughts on these figures as a layperson?
The value of a country’s economic output is measured by GDP, or Gross Domestic Product. Here’s a simple example for newcomers. Consider the following six brothers: A, B, C, D, E, and F. What each of them does for a living is as follows:
D: Produces steel sheets. His total sales for the year are Rs 1 lakh. He has sold steel sheets to B for Rs 25000 out of this Rs 1 lakh.
E: Rice producer and seller. His total sales for the year are Rs 50,000. He has sold grains to C for Rs 20000 out of the Rs 50.000.
(In all of these examples, the sale price includes the cost of raw materials, labor, and the owner’s profit.)
Step 2: Determine overlapping sales, also known as intermediate consumption, which is when one person’s sale becomes raw material for another. This equates to Rs 45,000.
Step 3: To avoid double counting, reduce total sales by intermediate consumption (for instance, the sale value of B includes the cost of steel sheets purchased from D). This comes to a total of Rs 12.05 lakh.
This six-brother family’s GDP is Rs 12.05 lakh. Instead of 6 brothers, we now have the GDP of a country when this operation is repeated for the entire country.
The rate of GDP growth shows the economy’s speed. For example, due to a downturn in the US economy, GDP has been increasing at a snail’s pace of 1-2 percent in recent years, occasionally dipping into negative territory. India, on the other hand, has had GDP growth of 7-8 percent in recent years. And the government expects it to hit 7.2 percent in 2012-13.
While 7.2 percent growth seems impressive, especially in light of the current global economic climate and when compared to 1-2 percent growth rates elsewhere, it does not convert into much for India’s level of living. Not in the foreseeable future, at least. This is where Gross National Income (GNI) per capita and GDP per capita come into play.
The GDP per capita is just the GDP divided by the total population of a country. In our case, this would be Rs 12.05 lakh divided by the total number of people employed by each of the six brothers’ factories. The GDP per capita closely reflects the ‘average’ revenue per person in the economy because the GDP is divided by the total number of workers. It is expected that when GDP rises, everyone in the chain will profit, and that the increase will have a trickle-down effect on the populace, raising the standard of living. If you make more money, you may pay more for your domestic help, raising their standard of living. Of obviously, the rate of growth must be higher than the rate of inflation.
Before I get to the main point, I need to go over a few more clarifications. So please be patient with me. The Gross National Income, or GNI, differs slightly from the GDP. GNI incorporates net revenue earned from foreign nations, whereas GDP exclusively counts output and services within a country. The gross national income (GNI) divided by the population equals per capita GNI.
India’s per capita income has now surpassed Rs 50,000 for the first time in 2010-2011, according to the government. It costs Rs 53,000, or about $1,000 USD. This is based on current or market values. At constant prices, that is, after inflation, the same works out to USD 790.
In absolute terms, statistics are meaningless. So, let’s get down to business with some serious global comparisons. According to a 2010 HSBC analysis, these countries were ranked in terms of GDP as follows:
So that was when India was at number eight. Let’s take a look ahead. According to the research, the top economies will be in place by 2050.
India ranked last in 2010 in terms of income per capita among the top 30 largest economies in 2050, and it will continue to rank last in 2050. In 2010, China was ranked 27th, but by 2050, it will be ranked 20th. According to the report, India’s population will surpass China’s by 2050.
There isn’t much left after the massive GDP trickles down. Consider China’s GDP in 2050 with a population of nearly the same size. In absolute terms, the United States has the biggest GDP, but it also has a smaller population than China and India. In terms of absolute GDP, China is second only to the United States, but the country’s massive population drives down GDP to levels well below those of the United States. However, because the GDP is enormous, the per capita GDP is higher than that of India.
What is the difference between GDP, GNP, and GDP per capita?
The gross national product (GNP) is defined as the entire worth of all revenue earned by citizens of a country, regardless of source. The total value of production realized by resident producers in an economic territory, on the other hand, is referred to as GDP.
What exactly does per capita income imply?
The amount of money earned per person in a country or region is referred to as per capita income. Per capita income can be used to calculate an area’s average per-person income and to assess the population’s level of living and quality of life.
Is Y a source of income?
With the release of General Theory of Employment, Interest, and Money, John Maynard Keynes introduced new thinking on income and employment theory (1936). Keynesians have emphasized the relationship between income, output, and expenditure, based on his theory. Because transactions are two-sidedone person’s income is another person’s expenditurethe relationship can be stated as Y = O = D, where Y represents national income (i.e., purchasing power), O represents the amount of national output, and D represents national expenditure. Effective demand is equal to both income and output, according to this equation. Because customers can spend or save their money, Y = C + S, where C represents consumption and S represents savings.
Is GDP a reliable indicator of economic growth?
GDP is a good indicator of an economy’s size, and the GDP growth rate is perhaps the best indicator of economic growth, while GDP per capita has a strong link to the trend in living standards over time.
What are the five wealthiest countries in terms of GDP?
What are the world’s largest economies? According to the International Monetary Fund, the following countries have the greatest nominal GDP in the world:
Why is a low per capita GDP bad?
GDP per capita is a widely used indicator of a country’s level of living, prosperity, and overall well-being. A high GDP per capita suggests a high quality of life, while a low GDP per capita indicates that a country is struggling to meet its citizens’ basic needs.