FRIDAY, JUNE 20, 2025

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India’s Economic Quest

In its quest for inclusive growth, India should focus on increasing the per capita income to shed the middle-income country tag

Published on Jun 2, 2025

By The Editorial Team

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  • In its quest for inclusive growth, India should focus on increasing the per capita income to shed the middle-income country tag. Although India's per capita income has risen quite impressively from $ 360 (approx. INR 30739 in current exchange rate) to $ 2, 700 (approx. INR 2,30,541 in current exchange rate) during 1990-2025, it still remains much below the $ 14, 000-mark approx. INR 1195401 in current exchange rate) necessary to find a place among the high-income countries. Increase in per capita income is necessary as high growth and low-income indicates disparities in the society, which is not a good sign for a vast and diverse country like India.
  • Going by the present trend, it seems the Indian economy may cross the $ 14, 000 benchmark with a concerted efforts, as India has done exceedingly well on the economic front during the past three decades. The country’s economy has grown 6.3 per cent per annum during 2000-2024, making it the fastest growing economy among the big economies in the world. At present, India’s economy is 11.5 per cent bigger than what it was in 1990. Besides, India has managed to restrict its population growth to 1.6 times, which has improved the per capita income. With all these positive developments, the country has now become the world’s fourth largest economy and has the potential to surpass the third placed Germany in a couple of years.
  • In its endeavour to increase per capita income, India may take a leaf out of countries like South Korea, Poland and Chile, which have successfully managed to get out of the middle-income trap. Even China is at the threshold of achieving the feat with its per capita income currently standing at $ 13, 000. In this context, the fact that both India and China roughly have the same per capita income in the 1990s, will definitely provide New Delhi a much-needed boost. As a matter of fact, two the Asian giants, which represent 37.17 per cent of the world's population, have dominated the world economic scene like never before for last couple of decades. By managing to maintain a growth rate of 10 per cent for three decades, the Chinese economy is now the second largest in the world at $ 19 trillion. During the last 35 years, its economy has expanded by 51 per cent and is not far from becoming a high-income country.
  • On its part, India has also done well in terms of economy in recent times, considering the fact that the world economy has gone through various ups and downs during the last three decades. It may be noted that the Chinese quest to be an economic power started way back in 1978, while India initiated economic reforms in 1991. India, however, had to face the challenges posed by economic recession in 2008, COVID-19 pandemic (2020) and trade disruption caused by several wars over the last few years but managed to overcome them. What remains to be seen is whether or not it will succeed in its quest to become a high-income country.