Laundry hangs from a line in a slum area of New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

India Per Capita Income Grew At Its Slowest In 6 Years In 2017-18

The average income earned by Indians grew at the slowest pace in six years in 2017-18, as growth in the economy sputtered and inflation remained low.

Per capita income, or the average income earned per person in India, stood at Rs 1,12,835 for March 2018 as compared to Rs 1,03,870 for March 2017, according to data from the Ministry of Statistics and Program Implementation. The growth of 8.6 percent in per capita income is the lowest in six years in nominal terms.

Per capita income is measured by calculating the net national income per person at current prices. It is impacted not only by the growth in the economy but also inflation.

Arjun Jayadev, associate professor of economics at Azim Premji University, points of that the high growth in per capita income in 2012-13 and 2013-14 was partly due to high inflation. Consumer price inflation rose 10.2 percent and 9.5 percent respectively in those years, leading to higher growth in per capita income. In 2017-18, growth and inflation were low leading to a relatively modest increase in per capita income.

At constant prices, growth in per capita income was the slowest in about four year in line with GDP growth, Jayadev added.

Real per capita growth this year has been the lowest in four years because GDP growth has been lower in 2017-18 than in 2016-17. Slow investment due to the balance sheet effects, demonetisation and GST have all led to lower per capita income growth.
Arjun Jayadev, Professor of Economics, Azim Premji University

The World Bank, in its inaugural report on inequality, had noted that economic powerhouses including India are witnessing slowing growth with per capita GDP growth rates exhibiting ‘recurrent ups and downs’. The report, published in 2016, outlined the need for sustainable growth in per capita income ‘to achieve the maximum possible increase in living standards among the less well off.’

India ranks poorly in terms of per capita income. According to the IMF’s 2017 rankings, India ranks 126 out of 200 countries in terms of per capita income.

Srijit Mishra, professor at the Indira Gandhi Institute of Development Research notes that tracking per capita income is important for developing economies.

Per capita income is an important parameter for emerging as also for other developing economies. The distribution or an increase in per capita income of the lower deciles should matter more not only from an ethical perspective but also because they have the potential to foster greater demand and through that generate greater growth.     
Srijit Mishra, Director - NCDS and Professor, IGIDR 

Mishra also points out that along with the weak growth at the aggregate level, growth trends in employment intensive sectors are also not encouraging and don’t bode well from the viewpoint of poverty reduction.

Growth for sectors like agriculture, mining and quarrying, and manufacturing was lower in 2017-18 compared to 2016-17. These sectors also saw growth rates which were lower than overall growth in the economy. “This means that growth in the sectors that are important for poverty reduction have been much lower,” Mishra said.