India should target per capita, not aggregate GDP: Path to Viksit Bharat

Source: The post India should target per capita, not aggregate, GDP has been created, based on the article “Path to Viksit Bharat” published in “Indian express” on 4th April 2024.

UPSC Syllabus Topic: GS Paper 3-Indian economy- growth and development

News: The article compares the economic growth of China and India from 1990 to 2022. It discusses China’s rapid GDP growth, surpassing the US and its potential to become the world’s largest economy. It also covers India’s slower growth and its status as an emerging economy.

How have China and India’s economies grown since 1990?

In 1990, China’s GDP, reflecting all goods and services produced within the country, was just 23% higher than India’s.

Back then, China and India ranked as the world’s 11th and 12th largest economies, with nominal GDPs of $395 billion and $321 billion, respectively.

Fast forward to 2022, the economic gap widened significantly, with China’s economy becoming 5.3 times larger than India’s.

China’s economy grew at a faster pace, averaging 10% in the 1990s and 10.4% in the 2000s, compared to India’s growth of 5.8% in the 1990s and 6.3% in the 2000s.

By 2010, China’s GDP had grown to $6.1 trillion, 15.4 times its 1990 level, while India’s GDP reached $1.7 trillion, only 5.2 times its 1990 level.

China’s per capita GDP in 2022 was $12,720, near the high-income threshold. India’s was $2,411, in the lower-middle income range.

By 2022, China’s economy size ($18 trillion) surpassed the US’s 2014 level, whereas India, with a GDP of $3.4 trillion, resembled China’s economy in 2007.

Source:

Why should India target per capita, not aggregate GDP?

Standard of Living vs. Global Influence: While Monaco, Liechtenstein, and Bermuda have high per capita GDPs, they are not superpowers. This shows that high per capita income doesn’t always correlate with global power, but it does indicate better living standards for citizens.

India’s Large Population: Given its massive population, India’s per capita GDP is more crucial for reflecting individual prosperity than aggregate GDP.

Economic and Demographic Balance: India, being a lower-middle-income country, should balance improving its per capita GDP, like China (which increased its per capita GDP from $348 to $12,720), and enhancing overall economic size.

Long-term Development Goals: For sustainable development, India should aim for higher per capita GDP to ensure widespread prosperity, aligning with its goal of becoming a developed nation by 2047.

Question for practice:

Examine why India should prioritize per capita GDP over aggregate GDP growth, considering its economic trajectory compared to China’s and its long-term development goals.