There is a lot of talk — bragging — about India being on its way to becoming the fifth largest economy in the world. While this index is of some importance in terms of indicating the scale and the size of the country’s economy, it does very little to indicate the quality of life enjoyed by its citizens. For instance, while the absolute size of the economy might put India among the top five or six economies of the world, an examination of its per capita income would put India way down the rankings given the huge size of the population. This reveals the importance of measuring and bettering India’s per capita income, a point that was recently raised by the former governor of the Reserve Bank of India, C. Rangarajan.
But even though per capita income is a better indicator of what an average citizen earns, it could be imperfect since it clouds many important features of a nation’s well-being. For instance, per capita income says nothing about the unemployment situation in an economy; neither is it indicative of its extent and the availability of State support to address the challenge. Similarly, information and understanding of the degree of inequality in income and wealth are a must. Even with a high per capita income, there could be widespread poverty and deprivation if the bulk of the income is appropriated by the rich and the super-rich. Another important feature of the quality of economic life depends on how the economy’s natural resources are being used and conserved. It is quite possible for an economy to clock a remarkably high aggregate income for a short span of four or five years by the systematic depletion of natural capital like forests and mineral ores. In short, the aggregate income of an economy hides much more than what it reveals.
India’s performance on almost all the aspects of an economy that go beyond aggregate income is dismal. Take, for example, the Human Development Index computed annually by the United Nations Development Programme. It is a composite index of a nation’s per capita income, educational attainment and health facilities. Here, India, in terms of the latest ranking, stands at 132 out of a set of 191 nations. Recent reports estimate that the top 5% in India own around 50% of the nation’s wealth while the bottom 50% own only 3%. Income disparities are not only large but are also worsening over time. The figures on unemployment and poverty are of concern too. India’s international ranking on the environmental front in terms of the efficiency of managing environmental resources stands at the very bottom. What India requires, if the nation has to be honest in facing its own problems, is the adoption of a dashboard of indices that would give a better idea of the true state of the economy.