India’s Per Capita Income to Rise by $2000 in 5 Years
- October 5, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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India’s Per Capita Income to Rise by $2000 in 5 Years
Sub : Eco
Sec: National Income
- Finance Minister’s Statement:
- Finance Minister Sitharaman stated that the coming decades will see the steepest rise in living standards for Indians, marking a significant period for the country’s development.
- Per Capita Income Projection:
- India’s per capita income is projected to increase by $2,000 over the next five years.
- As per IMF projections, it took 75 years to reach the current per capita income of $2,730, but adding another $2,000 will take only five years.
- Reduction in Inequality:
- Inequality in India has declined, as reflected in the Gini Coefficient, which measures income inequality:
- In rural areas, it improved from 0.283 to 0.266.
- In urban areas, it improved from 0.363 to 0.314.
- Inequality in India has declined, as reflected in the Gini Coefficient, which measures income inequality:
- Impact of Economic Reforms:
- The improvements in inequality are expected to continue as the effects of the last 10 years of economic and structural reforms become more visible in the data, especially as the impact of the Covid shock fades.
- Fiscal Discipline Commitment:
- The government is committed to reducing the fiscal deficit:
- The fiscal deficit is estimated to decline from 5.6% of GDP in FY24 to 4.9% of GDP in FY25.
- Fiscal discipline will help control bond yields and reduce borrowing costs across the economy.
- The government is committed to reducing the fiscal deficit:
- Capital Expenditure Growth:
- Capital expenditure is budgeted to increase by 17.1% to ₹11.1 lakh crore in FY25, which amounts to 3.4% of GDP.
- A larger proportion of the fiscal deficit is now allocated to capital outlays, indicating a focus on investment-oriented deficit financing.
- Lowering of Subsidies:
- A decline in commodity prices has allowed for reduced allocations for fertilizer and fuel subsidies, contributing to restrained revenue expenditure growth.
- Revenue expenditure is projected to grow by 6.2% year-on-year.
- India’s Economic Performance:
- India’s economic performance over the past decade has been notable, with the country leapfrogging from the 10th to the 5th largest economy in just five years.
- The economy has maintained high growth rates and inflation within a comfortable range, providing a solid foundation for future growth.
Gini Coefficient:
- The Gini Coefficient measures income inequality in a country, ranging from 0 to 1.
- A 0 represents perfect equality (everyone has the same income).
- A 1 represents maximum inequality (one person has all the income).
Fiscal Deficit:
- Fiscal Deficit occurs when a government’s expenditures exceed its revenues (excluding borrowings). It indicates the amount of borrowing required to meet the gap.
Bond Yield:
- Bond Yield is the return an investor earns on a bond. It is inversely related to the bond price. As bond prices fall, yields rise, and vice versa.
Deficit Financing:
- Deficit Financing refers to a government funding its excess expenditures over revenue by borrowing or creating new money, often through the issuance of government bonds.