This year, India became the 5th largest economy in the world on the basis of GDP (nominal) after United States, China, Japan and Germany. The current GDP (nominal) of India is around $3.2 Trillion.
The populace and media has been showing a lot of excitement after India surpassing developed countries like United Kingdom, France, Italy and Canada in terms of GDP, but fail to recognize that the GDP alone is not the SI unit of wealth and development.
By definition, Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a region during a specific period. We can also say GDP is the product of the population and GDP per capita of a region.
India’s GDP is more than that of France and many other developed nations because of its enormous population. The population of India is around 1.3 billion, whereas the population of France is just 65.2 million.
Let’s take a hypothetical case,
There are 4 countries: A, B, C and D.
Population: 1 billion
GDP per Capita (per person): $1
GDP: $1 billion ($1,000 million)
Population: 10 million
GDP per Capita (per person): $25
GDP: $250 million
Population: 100 million
GDP per Capita (per person): $5
GDP: $500 million
Population: 1 million
GDP per Capita: $100
GDP: $100 million
If we rank these countries by their GDP, the rankings will be:
#1 COUNTRY A: $1 billion
#2 COUNTRY C: $500 million
#3 COUNTRY B: $250 million
#4 COUNTRY D: $100 million
But are the people in “COUNTRY A” really wealthy? The truth is that the average GDP per person in “COUNTRY A” is just $1. Whereas, the people of “COUNTRY D” have 100 times more GDP per capita than “COUNTRY A”.
If we compare the GDP per capita of India by France, India’s GDP per capita is just $2,338 which is way less than the world average. Moreover, 87% of Indians live below $5.50 a day (middle class income poverty line). The GDP per capita of France is $41,761. The average person in France is 20 times wealthier than the average person in India.
India is one of the countries with the highest income inequality. According to Oxfam Report, the richest 1% own 73% of India’s total wealth.
The major reason why India’s GDP is in trillions is because its population is in billions.
India’s neighbour China has also faced this issue but recently lifted 800 million people out of extreme poverty and is developing at a much faster pace than India.