📈 India’s Per Capita Income in Global Context: 1990 vs. 2023

Despite India’s higher economic growth rate of 6.0% annually (CAGR) from 1990 to 2023, compared to the global average of 3.4%, India's GDP PPP per capita has not improved significantly relative to most countries, and has only outpaced some African nations. In 1990, India’s GDP PPP per capita was higher than China’s, but by 2023, China's GDP PPP per capita is twice that of India’s. One reason for this disparity is India's higher population growth rate compared to other countries. From 1990 to 2023, India’s population increased by 64%, while the global population grew by 54% and China’s population grew by just 23%.

India’s economic growth has been driven by several factors, including liberalization policies in the early 1990s, which opened up the economy to foreign investment and reduced trade barriers. The service sector, particularly IT and software services, has been a significant contributor to growth. Additionally, the country has a large, young workforce which has driven domestic consumption and economic activity.

However, despite these strengths, India's GDP PPP per capita has lagged behind due to several challenges:

1. Population Growth: India's population growth rate has been higher than that of most other countries. The rapid increase in population has put pressure on resources and infrastructure, diluting the gains in GDP when measured on a per capita basis.

2. Income Inequality: Economic growth has not been evenly distributed across the population. Significant income inequality means that the benefits of growth have not reached all segments of society, limiting improvements in average living standards.

3. Rural-Urban Divide: A large portion of India’s population still lives in rural areas where access to quality education, healthcare, and employment opportunities are limited compared to urban centers. This divide has hindered overall economic progress and improvements in per capita income.

4. Infrastructure Deficits: Despite progress, India still faces substantial infrastructure deficits, including in transportation, energy, and sanitation. These deficits hinder economic efficiency and productivity.

5. Education and Skills: While India has a large, young workforce, there are challenges related to education and skills development. The quality of education varies widely, and there is a significant gap between the skills required by the job market and those possessed by the workforce.

6. Health: Public health challenges, including malnutrition and limited access to healthcare, have also impacted economic productivity and development.

In contrast, China's economic strategy has been markedly different. Since the late 1970s, China implemented market reforms that transformed its economy from a centrally planned system to a more market-oriented one. Key factors in China's success include:

1. Population Control: The one-child policy, although controversial, helped to control population growth, reducing the pressure on resources and allowing for more rapid per capita income growth.

2. Manufacturing and Exports: China positioned itself as the world’s manufacturing hub, leveraging its vast labor force to produce goods for export. This export-driven growth model generated significant revenue and facilitated rapid industrialization.

3. Urbanization: China has undergone significant urbanization, with millions of people moving from rural areas to cities, where they can access better jobs and services, contributing to higher economic productivity.

4. Infrastructure Investments: Massive investments in infrastructure, including transportation networks, energy production, and urban development, have supported economic growth and efficiency.

5. Government Policies: The Chinese government has actively managed economic development through five-year plans, focusing on strategic industries, innovation, and technology advancement.

6. Foreign Direct Investment (FDI): China has been a major recipient of FDI, which has brought in not just capital but also technology and expertise, further boosting economic growth.

As a result of these differences, China has managed to achieve higher GDP PPP per capita growth compared to India. For India to bridge this gap, it will need to address its structural challenges, invest in human capital, and implement policies that ensure more inclusive growth.