Indian Economy

puneets · Post by **puneets** » Wed Sep 28, 2005 5:32 am

There seems to be a lot of confusion between GDP (per capita) and per-capita Income.

Sandeep · Post by **Sandeep** » Wed Sep 28, 2005 5:38 am

Basuji (well you replied my post with "ji" at the end), please see this link: -

http://in.rediff.com/money/2005/jun/30income.htm

India's per capita income rose by 5.2 per cent to Rs 12,416 (about $285) during 2004-05.

This is 2005 figure and is something new unlike my pseudonym

Want to say something about this!

PKBasu · Post by **PKBasu** » Wed Sep 28, 2005 5:41 am

Puneet, if you remember that

National Product = National Expenditure = National Income

some of the confusion should be removed.

Also,
Gross National Product = Gross Domestic Product + Net Factor Income from abroad

puneets · Post by **puneets** » Wed Sep 28, 2005 5:48 am

PKBasu wrote:Gross National Product = Gross Domestic Product + Net Factor Income from abroad

Shouldn't we subtract the money that intl. firms make in our county ?

Edit- maybe that's what u mean by 'Net'.

PKBasu · Post by **PKBasu** » Wed Sep 28, 2005 5:56 am

Rediff, sadly, is confused (or at least the reporter writing that story is). The figure quoted is in 1993/94 rupees (and the conversion to dollars is meaningless).

National income data is reported in "real" (constant-rupee) terms, in order to give an indication of the actual increase in national income/product before factoring in inflation. Reporters often get confused when they see these figures. It is appropriate to report the growth in this figure, but the figure itself is not very meaningful (unless reported as "xx 1993/94 rupees").

Another source of confusion (in inter-country comparisons) arises because India reports its GDP (and GNP) at factor cost, while most other countries report it at market prices. (Factor cost calculations minus net indirect taxes from GDP at market prices). Bloomberg, for instance, regularly reports India's GDP at factor cost and compares it to other countries' GDP at market prices (without knowing the difference). India reports its National Income data in a very comprehensive manner (providing figures for all the different definitions and thereby confusing most observers!).

PKBasu · Post by **PKBasu** » Wed Sep 28, 2005 6:02 am

puneets wrote:
PKBasu wrote:Gross National Product = Gross Domestic Product + Net Factor Income from abroad
Shouldn't we subtract the money that intl. firms make in our county ?

Edit- maybe that's what u mean by 'Net'.

Factor income from abroad can be wages, rents, interest and investment-income earned (by Indians) abroad and remitted home. To get the net figure, from this one subtracts wages, rents, interest and investment-income earned by foreigners in India and remitted abroad.

Sandeep · Post by **Sandeep** » Wed Sep 28, 2005 6:03 am

PKBasu, but lot of other sources also claim India's per capita income to be around 280 dollars.

http://timesofindia.indiatimes.com/arti ... 009693.cms

http://english.people.com.cn/200506/30/ ... 93366.html

These are just examples and there lot of other sources too which say the same. Is everyone wrong?

PKBasu · Post by **PKBasu** » Wed Sep 28, 2005 6:07 am

Given the terminological confusion, I needed to be precise in my original post regarding this:

PKBasu wrote: India's GDP at market prices was US$691.2bn in FY2004/05, and its population was 1.091bn. So its per capita GDP was US$633.5 in FY2004/05.
.

puneets · Post by **puneets** » Wed Sep 28, 2005 6:09 am

http://en.wikipedia.org/wiki/Economy_of_India

Nice link

Sandeep · Post by **Sandeep** » Wed Sep 28, 2005 6:25 am

PKBasu, I didn't understand what you said. India's per capita Income and GDP per capita income are two dofferent things right?

PKBasu · Post by **PKBasu** » Wed Sep 28, 2005 6:29 am

Sandeep, you don't bother to absorb what you're reading. Look at the second paragraph of the Times of India piece you refer to. It says, "At current prices, the per capita income in 2003-04 grew 10.2% to Rs 20,989 from Rs 19,040 in 2002-03". At the 2003-04 exchange rate, this was US$457.

National income = NNP at Factor Cost = GNP at Factor Cost - Depreciation

Most other countries report GDP at market prices, which is

National Income + Net Indirect Taxes + Depreciation - Net Factor Income from abroad

Arjun and I are referring to GDP per capita at market prices. At any rate, even the Times of India does not confirm your hunch, although one incorrect reference in the first sentence of their report has probably contributed to your confusion. The first para reads, "India's per capita income rose sharply by 7.1% in real terms to Rs 11,799 in 2003-04. The per capita income calculated at 1993-94 prices stood at Rs 11,013 in the previous year". Although I haven't independently verified the precise figures, everything in those sentences appears right except that the 2003-4 figure should have been "Rs11,799 measured at 1993-94 prices".

Sandeep · Post by **Sandeep** » Wed Sep 28, 2005 6:43 am

I didn't understand a bit from TOI article.

India's per capita income rose sharply by 7.1% in real terms to Rs 11,799 in 2003-04.

At current prices, the per capita income in 2003-04 grew 10.2% to Rs 20,989 from Rs 19,040 in 2002-03.

PKBasu · Post by **PKBasu** » Wed Sep 28, 2005 6:46 am

Please read the post immediately before yours!!!

The first sentence should have been "India's per capita income rose sharply by 7.1% in real terms to Rs 11,799 (measured in 1993-94 rupees) in 2003-04". In general, it is meaningless to refer to the actual figure for real GDP or real national income. The growth rate has some meaning.
The second quote is correctly written.

Post by **jayakris** » Wed Sep 28, 2005 6:57 am

In layman's terms (if my understanding is right),

The TOI report does not have mistakes in it, because it mentions that the Rs 11K figure is in 1993-94 prices (thus adjusted for inflation), and so giving a $285 value for it means nothing. The actual value was Rs 21K which converted to dollars is about $450K.

The Xinhua news agency report is wrong on the other hand, because they actually converted the inflation adjusted figures to dollars ...

Jay

Sandeep · Post by **Sandeep** » Wed Sep 28, 2005 7:05 am

Understood. It is pretty meaningless to mention 285$ if it is just a projection!