Are Indians Richer From?Faster GDP Growth?

"There can be no trade-off between sustainability and inclusivity. GDP growth should trigger Per Capita Income. They need not be antagonistic to each other."

India remains a bright spot on the world stage as it grows steadily from a relatively low base. Last year, India overtook the UK to become the world's fifth biggest economy after the US, China, Germany and Japan. Per the Reserve Bank of India, by the end of 2023, India stands fifth in the world at US$3.7 trillion and shall be the fourth largest in the next 12 months.

Ironically, the GDP and Per Capita Income of Indians are not growing in tandem. India’s per capita net national income stands at INR 172,000 per person, according to the National Statistical Office (NSO). The achievement marks an almost 100 per cent increase from the per capita income in the last eight years- INR 86,647.?

Calculated differently on current prices, the per capita net national income (NNI) realistically increased by 35 per cent from INR 72,805 to INR 98,118 in 2022-23. Either way, India has grown in Per Capita Income. But still, Indians struggle on the economic front.?

Percapita income is the average income of a person in a specific area, which is reached by dividing total area income by its total population. So when the average income of some population segments increases, it inflates the per capita income. Indian geographic profile has numerous such distortions.?

Despite doubling the Per Capita Income, Indians have not felt prosperous so far. Inappropriate wealth distribution, non-sustainable development, spiralling Inflation and poor consumption are four prime reasons for the struggling Indians not enjoying GDP growth.

1. Wealth Distribution?across India's 1.4 billion population remains uneven. According to economists, most of the increase in income accrues to the "op 10 per cent of the population, revealing the challenge of wealth distribution in the country. The longer this trend continues, the more impacted India's economy will be by the shocks emanating from the rise and fall in the fortunes of the elite few. A balanced regional development would be vital to achieving higher economic growth.

2. Sustainable Development?of the country necessitates higher human development standards across all segments of society. According to Oxfam's "Survival of the Richest" report, India's top one per cent owned more than 40.5 per cent of total wealth in 2021, while the bottom 50 per cent of the population had around three per cent of real wealth. During the pandemic, the billionaires in India grew their wealth by 125 per cent – INR 36.08 billion per day in real terms, as the number of impoverished Indians grew from 190 million to 350 million.

3.?Spiralling High Inflation?slows down consumption in India, and household savings are declining. Wage growth is also under pressure in the struggling low-income group. India's average inflation rate was 7.2 % year-on-year for the first half of FY2022-23; it was 5.8% in the previous two years. The average growth of India's per capita income in accurate terms from 2014 to 2019 was 5.6 per cent. Inflation has eaten out individual income growth, neutralising the Per Capita Income enhancements.?

India is still a rural-agrarian economy. Close to 70% of the population lives in rural areas, and 54% still depend on agriculture as their primary income source. Prosperous farmers mean more employment for the workers and the business people of every industrial area in the country.?

Unfortunately, Inflation continues its uptick. As input and production costs remain high, most industries pass on higher spending to final consumers to preserve earnings margins. The act accentuates Inflation.

Meanwhile, the RBI attempts to rein in inflation with policy rate hikes. Success is elusive so far.?

4. Consumption Trends?are vital to enhancing India's public prosperity. India's domestic consumption share to GDP was around 62% in 2022. It is 68% in the US, 55% in Japan, 52% in Germany, and 60% in the UK. The rise in spending share to GDP is a welcome change, but the consumption basket of Indians occupies food and non-durables, and there is hardly any money left after meeting the day-to-day expenses.?

More than 90% of Indians still draw a monthly salary of Rs.10,000 or below.?

The consumption mix in India's emerging economy sees higher spending on necessities and less on luxury and comfort. The consumption basket comprises expenditures on food at 30-32% share, transport at 15%, housing and utilities at 14%, and clothing, education, and health at 5% each. Durable and semi-durable items account for less than 10% of consumption.?

The situation contrasts with the US consumption basket, where household utilities have the highest share at 17%, and spending on food is only 8%. In the world's fourth-largest economy, Germany, food accounts for a 15% share of the consumption basket. The highest percentage is spent on housing and utilities at 25%, followed by transport and communication at 17% and recreation at 11%.

India can become the most prosperous country in the world by making things and producing goods Indians can sell. India must redistribute the wealth equitably so that the last mile Indian has access to similar happiness as those sitting near the economic goldmines.?

Rightly said, "As much as we need a prosperous economy, we also need the prosperity of its participants."