PER CAPITA

INCOME
Aakanksha, Abhi, Abhishek, Aditya, Aditi
 Content
● What is Per Capita Income
● Importance of Per Capita Income
● Categories of Per Capita Income
● Comparison with China and Pakistan
● Reasons of low capita income in India
● How to improve
● Limitations of Per Capita Income
 WHAT IS PER
CAPITA INCOME?
In latin, the word “Per
Capita” means “by head”
DEFINITION
• Per Capita income is a measure of the amount of money
earned per person in a nation or geographic region.
• It is used to determine the average per- person income for
an area and to evaluate the standard of living and quality of
life of the population.
• It is calculated by dividing the country’s national income by
its population
Importance of Per Capita Income
• Helps to evaluate the standard of living of the population
in the region.
• Evaluating people’s affordability and purchasing power.
• To compare the economic situation of countries.
• Indicates whether commodities and facilities are out of
reach by average people
• Deciding marketing and sales strategies for potential
customers
• Analyzing market demand for products
• Determining which countries require aid.
 Group of Countries based on
Per Capita Income

High Income Upper Middle Lower Middle Low Income

Countries Income Countries Income Countries Countries

>USD 8,335 USD 4,046- USD 8335 USD 675- USD 4,046 <USD 675
COMPARISON WITH CHINA AND
PAKISTAN
How has China surpassed
India despite being behind • 1950- China was behind
in 1950? India
• Until 1978 they grew at a
similar rate
• After that, with the end of
cultural revolution in china,
China’s per capita growth
was 10.1% and India 7.2%
 REASONS
1.Economy was privatized faster- post Cultural
Revolution
2.Prices were released faster
3.Labour market underwent much deeper
reforms
4.FDI was faster and to a greater extent.
 How did India
surpass Pakistan? • In 1950- Pakistan’s
PCI was higher than
India
• In 1970- Pakistan’s
PCI 1.5x than India
 Reasons
• A major turning point came when Pakistan lost its
Eastern flank following Bangladesh’s independence.
• Pakistan’s persistent underperformance’s reasons
include its political instability, thirl wall constraint.
• It needed to finance a growing import bill
• For India too, this has been a challenge but with the
advent of services, exports India was successful in
creating a niche for itself.