India has been chugging along nicely over the past few years. While this year's growth target of 9% is now left in the dust, all is not lost. Even in a deteriorating environment India is poised to grow by a respectable 6.9% this year. Compared with the anemic growth in developed markets, our growth looks all the more attractive. So what if it is well below target. But, while India is growing at a healthy pace, are its citizens becoming more prosperous?
Per capita income is the earnings of each Indian if the national income is divided evenly among its 1.2 bn population. This metric is an important indicator of overall prosperity in the country. According to the Estimates of National Income released by the Central Statistical Office, India's per capita income at current prices during 2011-12 is estimated to be Rs 60,972. This is compared to Rs 53,331 during 2010-11, showing an estimated rise of 14.3% for the year. The per capita income would have been even higher had GDP growth not slowed to 6.9% in the current fiscal from 8.4% last year. However, if we take the increase in per capita income at constant (2004-05) prices the growth is relatively muted. The growth is likely to about 5.6% in 2011-12. This is post discounting for inflation, which was at high levels for the year.
India has seen significant progress over the past few years. Per capita income in India has nearly doubled from the levels seen in 2004-05 touch Rs 53,331 in 2010-11. Now while these figures are impressive, it is not necessary that things are improving at the bottom of the pyramid.
Most of the growth on this front seems to be fueled by the rich Indians. India's per capita income officially grew by 15.6% in 2010-11. But the earnings of India's top executives rose much faster. The rise in top management pay of the listed companies during FY11 was twice as much at over 36%. The increase in overall employee costs of listed companies was, however, much closer to the country's per capita growth. This figure rose by 18.6% in 2010-11. The rich really seem to be getting richer. According to Forbes, there were 57 billionaires (measured in US dollar terms) in India in 2011. The 100 richest in India had a combined networth of US$ 241 bn representing 16% of the country's GDP.
So the increase in per-capita income cannot be looked at in isolation. These numbers can be misleading. Progress on poverty alleviation and financial inclusion really need to make a difference in a big way for India to progress as a nation.