PER CAPITA INCOME

Meaning and Significance

Per capita Income means how much an individual earns, of the
yearly income that is generated in the country through productive
activities. It means the share of each individual when the income
from the productive activities is divided equally among the
citizens. Per capita income is reported in units of currency. Per
capita income reflects the gross national product of a country. Per
capita income is also a measure of the wealth of a population of a
nation when compared with other countries. It is expressed in
terms of commonly used international currency such as Euro,
Dollars because these currencies are widely known.

Per Capita Income In India

India's per capita income is found by the Atlas method and by
employing official exchange rates for conversion. Further, this
Atlas method of calculating the per capita income of India is not
determined by using purchasing power parity, which essentially
adjusts exchange rates for purchasing power of currencies.
Economist have been giving considerable importance to the
performance of states vis a vis each other in terms of per capita
income. It has been observed that those states that were more open
and better adapted to economic liberalization have overall shown
faster rate of growth.

Per Capita Income of Various Indian States

The two backward states of the Indian republic Jharkhand and
Orissa are growing at a rapid rate in terms of the per capita income
because of rise of industrial activities in these two states.
Karnataka is at the top of the chart with the fastest growing per
capita income (nearly 9.28%) followed by Gujarat with 8.92%.The
per capita income in 17 states is below the national average of
8.4%. Per capita income shows the purchasing power of the states
and so it is very important for the states to increase the per capita
income of each person.

Current Situation
The average income of Indian has grown by 10.5% to Rs 44,345 in
2009-10 as against Rs 40,141 in 2008-09, at the current price.

The average income at the current price, which is also termed as

per capita income, rose higher than GDP at fixed price because of
inflation, which almost get added to the economic growth rate at
fixed price (2004-05 price).

The per capita income in the latest estimate was slightly higher
than Rs 43,749 calculated by the Central Statistical Organisation
(CSO) in its advance estimate for 2009-10 in February.

Per capita income at fixed price grew by 5.6% in 2009-10, which is

a better way of comparison and broadly factors in inflation. Per
capita income stood at Rs 33,588 in 2009-10 against Rs 31,821 in
the previous financial year, according to national income data.

Per capital income means income of each Indian, assuming

national income is evenly divided among the country's population
of 117 crore. At market price, size of the economy rose to Rs
62,31,171 crore in 2009-10, up 11.8% from Rs 55,74,449 crore in
2009-09. At 2004-05 prices, the size of GDP stood at Rs 44,64,081
crore in 2009-10 as against Rs 41,54,973 crore in 2008-09.
GRAPHICAL REPRESENTATION-

India's gross domestic product, that grew 7.4 percent in 2009-10, witnessed
an 8.9 percent growth in the first half this fiscal against the government
estimate of 8.5 percent.

Even if we manage to keep nine percent, which actually we have achieved in

the past, and the population growth is now probably going to be less than 1.5
percent, PCI will grow at more than 7.5 percent or so. When PCI grows at
7.5 percent, then it doubles in nine years and if that were to continue, then it
is easy to see that PCI will quadruple in 18 years and will increase eight fold
in 27 years.

In 1963, the economy was growing at a rate of 3.5 percent per year and
continued for the next 15-16 years. When an economy grows at 3.5 percent
in terms of GDP and the population growth is over two percent, which it was
at that time, the per capita income in such an economy is actually growing at
less than 1.5 percent.

While both the manufacturing and services industries are expanding by

almost 10 percent, agriculture output has jumped more than three percent to
4.4 percent on the back of a good monsoon season as domestic consumption
remains strong. The government expects these positive indicators to drive
economic growth to 8.5 percent by the end of fiscal 2010.

Similarly, the inflation rate is expected to remains high at more than seven
percent and the pressure on prices is expected to keep driving up interest
rates.