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Exercises · Q9

Q.Why does India's per-capita income remain comparatively low even though its total GDP has been growing rapidly? Explain briefly.

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Per Capita Income is defined as PCI=National IncomeMid-year PopulationPCI = \dfrac{\text{National Income}}{\text{Mid-year Population}}. This formula shows that PCI depends not just on how fast the numerator (national income/GDP) grows, but also on the size and growth rate of the denominator (population).

India's total GDP has grown substantially over the decades, but with a very large population base, the same absolute increase in national income has to be divided among a much larger number of people than in a smaller country with comparable GDP growth. If population grows at a meaningful rate alongside GDP, a large part of the gain in national income is effectively absorbed by having to be shared across more people, so per capita income rises more slowly than GDP itself. …

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