Per capita income is a measure of the average income earned by each person in a given country. It’s often used as a way to compare living standards between different countries or regions. While per capita income is a useful metric, it’s important to understand its limitations. For example, per capita income doesn’t take into account inequality, which can give a misleading picture of the average standard of living in a country. In this blog post, we’ll explore what per capita income is, how it’s calculated, and some of its limitations.
What is Per Capita Income?
Per capita income is a measure of the average income earned by an individual in a given area. It is often used to compare the standard of living in different areas or to compare the economic wellbeing of different groups of people.
Per capita incomes can be calculated for different time periods, such as a year, a quarter or a month. They can also be calculated for different geographic areas, such as countries, states or regions.
The most common way to calculate per capita income is to divide the total income of a particular area by its population. This gives you the average income earned by each person in that area.
For example, let’s say that the total income of a country is $100 million and its population is 10 million. The per capita income would be $10,000 ($100 million / 10 million).
It’s important to note that per capita incomes are just one way to measure economic wellbeing. They don’t take into account factors such as inequality or poverty.
Per Capita Income in India
Per capita income is an important economic metric that measures the average income earned by individuals in a given country. In India, per capita income has been on the rise in recent years, although it still remains relatively low compared to other countries.
In 2016, India’s per capita income was US$1,570, which was up from US$1,409 in 2015. This represents a growth rate of 9.5% over the previous year. India’s per capita income is still well below the global average of US$10,376 and ranks just 137th out of 190 countries.
However, India’s per capita income is not evenly distributed across the country. There are significant disparities between urban and rural areas, as well as between different states. For example, in 2016, the per capita incomes in Kerala and Tamil Nadu were more than double the national average, while in Bihar and Uttar Pradesh they were less than half.
Overall, India’s per capita income has been growing at a healthy rate in recent years and is expected to continue to do so in the future. However, there is still a long way to go before all Indians can enjoy a decent standard of living.
How is Per Capita Income Calculated?
Per capita income is calculated by dividing a country’s total income by its population. The resulting number is then divided by the number of people in the country who are employed. Finally, the resulting number is multiplied by the number of people in the country who are not employed. This final number is the per capita income.
What are the Advantages and Disadvantages of Per Capita Income?
There are a few advantages and disadvantages of per capita income that should be considered before making any decisions.
Advantages
- Allows for an equal distribution of resources among a population
- Indicator of economic growth or decline
Disadvantages
- Does not consider the distribution of wealth within a population
- Can be misleading when comparing different populations
Also Read: What Are Capital Expenditures (CapEx)