What is per capita Income ?
Per Capita Income refers to the average income of a person in a specific area or region within a certain period of time, usually a year. It’s calculated by dividing the total income of that particular area by its total population.
Understanding Per Capita Income ?
Per Capita income shows the average income per person in a particular area in a particular period of time. Its measure by the total income generated by the particular region divided by the total population and it includes not just working adults but also it includes new born children, college going youngsters and senior citizens too. In Any Country Gross Domestic Products (GDP) is considered as National Income, it can be in real GDP by calculating with a base pricing and Nominal GDP by calculating by current pricing.
Income Per Capita – Total Income By The Region In A Year/ Total Population of that Region in that particular year.
Let’s take an example,
Delhi is the capital of India let’s assume a total of 200 People are living in Delhi and the first 50 people are earning 1,00,000/- INR Per Person Per Year, Next 50 persons are earning 50,000/- INR Per Person per year and Third 50 Person are earning 1000/- Per Person Per year ( Let’s assume Below 10,000/- INR Per year income is considered as below the poverty line, So this 50 Person are Below the poverty line in actual income certificates) and Last 50 are children’s so they are not earning any money but they are the part of population.
Total Income Generated in Delhi
First 50 Person- 1,00,000* 50 = 50,00,000/-
Second 50 Person- 50,00050= 25,00,000/- Third 50 Person- 100050 = 50,000/-
Last 50 Person ( CHILD) = 0
Total = 75,50,000/-
The total population is 200
So, Income Per Capita= Total Income Generated By the region/ Total Population
= 75,50,000/200= 37,750/-
So, the Per Capita of Delhi is 37,750 INR Per Person In That Year.
Note- It’s Just an example not the actual Per capita income of Delhi.
What’s the latest Per Capita Income of India ?
India’s Per Capita income is not a good indicator to show actual income distribution in the country, in India 1% of population has the 40% of the country’s wealth.
In India per capita net national income is 1.84 lakh in the financial year of 2024 and it grows by 8.7% in comparison with the financial year of 2023. During the period of 2014-15 the per capita net national income was 86,647 INR and after 10 years it achieved more than 100% growth.
Its Per capita Net national income is Calculated by subtracting depreciation from Gross National Income.
Gross National Income (GNI) includes the GDP of the country plus net receivable from abroad net taxes, and subsidies from abroad.
Net National Income (NNI) is Gross National Income ( GNI ) net depreciation.
Top 10 Richest Countries in The World by Per Capita Income, Click to Know more
Limitations of Per Capita Income
Per Capita Income is not a good indicator of welfare and wealth distribution because it does not consider inflation, it does not consider who is able to work, it does not show actual wealth distribution.
Living Standard
As per the previous example taken by us First 50 people in Delhi earn a handsome amount of 1,00,000/- per person per year and the third 50 people earn 1000/- per person per year and the per capita income was 37,750 INR, So according to Per capita income all people in Delhi are earning good amount and no one needs government aids and assistants to service but in actual third 50 people are earning below the line amount and should be considered as Below Poverty Line (BPL) and government must provide them financial aids and subsides to service. So Per capita income is not helpful for the government to distribute financial aid.
Inflation
Let’s say the Per capita income in Delhi was 37,750/- Per person last year and now it is 41,525/- it means the Per capita income of Delhi has grown by 10% but in the same period inflation was 4% so in actual terms income was only grown by 6%, So in this Per capita income was failed to show actual income growth.
Saving and Wealth
Per Capita does not include generations’ wealth and savings, let’s assume a person’s income is very low but is living a good life due to his generation’s wealth and parents’ savings. Per capita income does not consider the actual living standard of a person due to its inability of calculate generational wealth and savings.
Children and senior citizens
Per Capita income considers children and senior citizens as working populations so if any country or region has more children and seniors means fewer working youngsters per capita income was very low due to the inability to calculate only working people.
International Comparison
Per capita income is calculated in domestic currency and does not consider exchange rates, so most agencies choose Purchasing Power Parity (PPP) over the Per capita income to compare the living standard between countries.
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