Bangladesh, which was once considered one of the world’s poorest countries, recently overtook India in terms of GDP per capita. Indian public are outraged by the news, but the government will not be able to follow Bangladesh’s lead in developing a more prominent low-wage manufacturing export sector. Instead, India requires reforms that will increase the salaries of regular workers, who are the country’s backbone and basis.
The average annual income earned per person in a country is measured as GDP per capita. India’s GDP per capita was $2,104 in 2019. However, by 2020, this figure will have fallen to $1,876, putting the country one spot behind Bangladesh, which has a GDP per capita of $1,887. Unlike India, Bangladesh’s economy has grown steadily over the last three years.
Indian populace are asking that Prime Minister Narendra Modi implement reforms and programs that will increase GDP per capita by raising wages for the country’s working class. Here are four potential approaches for India to increase its GDP per capita.
Ways India’s Government Can Improve GDP
- Farmers’ revenue will rise. In India, agriculture employs 40% of the population, and small-scale farming provides sustenance to many low-income areas. Despite decreasing profitability for farmers, the Indian government has consistently kept agricultural product prices low in favor of consumers. Farmers will be able to sell their products to the highest bidder under the recently introduced 2020 Farm Acts, allowing them to seek bigger wages. Farmers succeed when they are able to support other sectors of the Indian economy through their own purchases. Fertilizer, protective clothing, and tools are all necessities for farmers, especially as their businesses grow. This rise in spending directly results in the creation of new jobs for others.
- Infrastructure spending and investment by the government. The government is in charge of how much money the country spends on public issues each year. Government spending, on the other hand, is required to boost overall GDP per capita. Indian citizens’ salaries have reduced this year, implying lower private consumption. The government will offer individuals with increased convenience and efficiency in their work by investing money on building and repairing roads and bridges, as well as creating construction jobs. Furthermore, by allocating more funds to pay greater salaries, private consumption will rise once again, encouraging increased corporate investment and boosting the import-export market. The government would gain from the economic boost caused by spending a particular amount of money.
- India’s rural people are being urbanized. Economic growth is fueled by urbanization, and because India’s farming population is so large, transferring some of these farmers to cities would allow them to work in manufacturing. Not only would this assist build some of India’s medium-sized cities into more significant urban landscapes, but it would also boost agricultural output by reducing the number of farmers utilizing the same area of land. The government can encourage people to move to cities by offering benefits to rural residents, such as greater infrastructure and urban amenities like transportation and water management. Furthermore, increasing urban populations would resuscitate the housing market and provide banks with greater loan prospects. More development and urbanization will inevitably result in new opportunities for international investment and manufacturing exports.
- Increasing your competitiveness in high-potential industries. By establishing itself as a competitive manufacturer of electronics, chemicals, textiles, automobiles, and pharmaceuticals, India has the potential to generate up to $1 trillion in economic value. In 2018, these sectors accounted for 56% of global trade, but India only contributed 1.5 percent of global exports in these categories. India’s government may make this a reality by increasing urbanization and expanding the manufacturing worker force. The country’s imports currently account for a higher share of world trade than its exports. Increased competitiveness in these areas will not only boost India’s export potential, but also reduce its dependency on imports, lowering the amount of money citizens spend on foreign goods.
While the road to economic recovery is not always as clear as it appears, India’s government has a number of tools at its disposal to help ordinary employees earn more money. The government not only has a motivation, but also an obligation, to improve the living conditions of India’s working class, which is the backbone of the country’s economy. Improving India’s GDP per capita would benefit the country and its people immediately. Greater potential for industrial exports, foreign investment, and urbanization would all be reaped if the country invested in its own working class.
What factors contribute to a low GDP per capita?
The five main causes of low per capita output are highlighted in the following sections. The following are the reasons for this: 1. Low Savings and Capital Accumulation Rates 2. Skilled and educated workers are in short supply; 3. technological know-how is lagging. 4. Unemployment and High Population Growth 5. Political instability and anti-production government policies.
Cause # 1. Low Rates of Saving and Capital Accumulation:
The accumulation of capital, such as roads, structures, bridges, equipment, and vehicles, is critical to economic prosperity. Saving is necessary for capital accumulation. LDCs, such as India, are so impoverished that they have very little savings.
To obtain capital, such countries frequently borrow from more developed countries. Workers have less capital equipment to work with, resulting in poor per capita incomes. As a result, their productivity and output per capita are both low. This makes it impossible for them to save. Such a vicious spiral may frequently only be ended with the help of other countries.
Why is India’s economy doing so poorly?
In recent years, India’s economic development has slowed to a crawl. The pace of growth of the gross domestic product (GDP) has been slowing for three years, commencing in 2016-17 and decreasing to 4% in 2019-20, well before the epidemic.
What is the cause of the sluggishness? Fundamental policy blunders by the Narendra Modi government have been blamed by critics, including demonetisation, the goods and services tax, and the lack of major economic changes during the government’s first term. Their argument is devoid of merit. Demonetisation, according to most analysts, would be a death blow to the…
Is India’s GDP lower than that of Pakistan?
With a GDP of $2,709 billion dollars in 2020, India’s GDP will be about ten times that of Pakistan’s $263 billion dollars. The disparity is larger in nominal terms (almost ten times) than in ppp terms (8.3 times). In nominal terms, India is the world’s fifth largest economy, while in ppp terms, it is the third largest. Pakistan has a nominal ranking of 48 and a PPP ranking of 24. Maharashtra, India’s most economically powerful state, has a GDP of $398 billion, far exceeding Pakistan’s. Tamil Nadu, India’s second-largest economy ($247 billion), is relatively close. The gap between these two countries was at its narrowest in 1993, when India’s nominal GDP was 5.39 times that of Pakistan, and at its widest in 1973. (13.4x).
In terms of gdp per capita, the two countries have been neck and neck. For only five years between 1960 and 2006, India was wealthier than Pakistan. In 1970, Pakistan’s GDP per capita was 1.54 times that of India. Since 2009, the margin has widened in India’s favor. On an exchange rate basis, India’s per capita income was 1.56 times more than Pakistan’s in 2020, with an all-time high of 1.63x in 2019. The previous year, Pakistan was wealthier than India. Both countries rank near the bottom of the world in terms of GDP per capita. India is ranked 147 (nominal) and 130 (absolute) (PPP). Pakistan is ranked 160 (nominal) and 144 in the world (PPP). There are 28 Indian states/UTs that are wealthier than Pakistan.
In 2020, India’s gdp growth rate (-7.97) will be lower than Pakistan’s (-0.39) after 19 years. India’s GDP growth rate reaches a high of 9.63 percent in 1988 and a low of -5.24 percent in 1979. Pakistan’s inflation rate peaked at 11.35 percent in 1970 and peaked at 0.47 percent in 1971. Pakistan expanded by more than 10% in three years from 1961 to 2017, while India never did. India’s GDP growth rate has been negative for four years, whereas Pakistan’s growth rate has never been negative.
According to the CIA Fackbook, India’s GDP composition in 2017 was as follows: agriculture (15.4%), industry (23%), and services (23%). (61.5 percent ). Agriculture (24.7 percent), Industry (19.1 percent), and Services account for the majority of Pakistan’s GDP in 2017. (56.3 percent ).
Is India deteriorating?
Remember that, according to a Pew survey released in March, India’s middle class has dropped by as much as a third, with 3.2 crore dropping into the lower-income category and 3.5 crore slipping from that category to join the ranks of the poor, whose numbers have swelled. If the economic recovery has not been accompanied by a recovery in employment and consumption, the recovery will almost certainly be K-shaped.
Who has the lowest per capita income in India?
- It is a measure of the total volume of all commodities and services produced within the state’s borders over a certain time period.
Top 13 poorest countries in Asia (by 2020 GNI per capita, Atlas Method)
See the table at the bottom of this page for a complete ranking of Asian countries based on their economic health. You could also compare this list to the poorest African countries.
How can India boost its GDP?
As a result, India appears to be on track to earn the title of world’s fastest-growing big economy this year and keep it next year.
Keep in mind that, although the Chinese economy grew by 2.3 percent in FY21, the Indian economy shrank by 7.3 percent as a result of the Covid-19 pandemic.
China’s economic growth slowed more than predicted in the third quarter, owing to a failing property industry that is facing stricter policy measures and an impending energy crisis.
According to The Economist, China’s economic growth is currently being hampered by a “triple shock from energy, property, and the epidemic.”
The difficulties of Evergrande, the insolvent Chinese property giant, are already well-known around the world.
Another stumbling block is the Chinese government’s draconian controls on the country’s tech firms.
India’s growth forecasts for FY22 have been kept at 9.5 percent by the Reserve Bank of India and Standard & Poor’s.
Then there’s the ongoing export boom, which is accompanied by increased tax revenue and lower inflation.
Another good area is the decreasing amount of bad debt burdening the financial system.
Let’s not forget about the soaring corporate earnings, the upbeat industrial production figures, and the ever-increasing number of unicorns.
There are also government initiatives such as Gati Shakti and asset monetisation that are projected to gain traction.
However, significant worries remain about whether high development can be continued in the medium future.
If the forecasts for FY22 and FY23 come true, India will experience the high growth rates of the 2000s once more. However, much work remains to be done if that pace is to be maintained in the future.
Is India gaining ground on China?
According to the United Nations Conference on Trade and Development (UNCTAD), India’s GDP would expand the fastest in 2022, at 6.7 percent, followed by China, which will grow faster in 2021.