NEW DELHI: Rs 1 lakh — that benchmark will be achieved in the next financial year when per-capita income crosses the six-figure mark for the first time. To be sure, it’s the equivalent of just $1,500 but all the same a number that has some significance in a country of 1.2 billion where 12.4% in 2011-12 were living on less than $1 a day, according to the World Bank.
Per capita income at current prices was Rs 93,231 in FY16, up 7.3% from Rs 86,879 in the year before. It stood at Rs 71,050 and 79,412 in FY13 and FY14, respectively.
At that rate of acceleration, per-capita income will exceed Rs 1 lakh in FY17. The Budget for next year, announced by finance minister Arun Jaitley on February 29, assumed a nominal GDP growth of 11%. That would mean a similar rise in net national income and, adjusted for an increase of 1.2% in population, should yield an expansion of more than 8% in percapita income.
“Nominal GDP growth has been an average 11.7% in the past four years, so with a 1.2% population growth, we can expect per capita incomes to exceed Rs 1 lakh in FY17,” said Saugata Bhattacharya, chief economist, Axis Bank.
“It would be interesting to check the expenditure surveys to gauge the distribution of the rise across income classes,” he added. Per capita income broadly measures quality of life in a geographical region — country, state or city.
It’s arrived at by dividing the country’s total income by its population. It also needs to be adjusted for inflation to see whether incomes are rising.
“At current prices, per capita income is expected to cross the threshold of Rs 1 lakh in 2016-17, which is encouraging. However, large regional variations and an urban-rural divide in income levels persist,” said Aditi Nayar, chief economist at ICRA. If the average amount crosses six figures, it would have taken India almost seven years to double its per-person annual income from Rs 46,492 in FY10.
The increases in per capita income have been driven by urban growth. “Given that agriculture has suffered and the rural economy is under distress, total per capita income has grown largely on the strength of the urban economy,” said Crisil chief economist DK Joshi.
“Agricultural incomes have not grown and the rural economy is languishing. Not only are incomes lower in rural areas, but inflation is also higher. In fact, poor states have seen higher inflation.”
Jaitley had announced a series of steps in his Budget to spur the rural economy.