Development 2

 (ii) What is national income?

National income is defined as the total value of all the goods and services produced within a

country plus net income coming from abroad.

(iii) What is per capita income?

Per Capita Income

𝑃𝑒𝑟 𝐶𝑎𝑝𝑖𝑡𝑎 𝐼𝑛𝑐𝑜𝑚𝑒 =

National Income

Population

It is calculated by dividing the National Income of the country by population.

Uses:

(i) It is used to compare different countries.

(ii) The World Bank has divided the countries into rich or low income countries on the

basis of per Capita income.

• RICH COUNTRIES

• Countries with per capita income of US$ 12,056 per annum and above in

2017, are called rich countries

• LOW INCOME COUNTRIES

• Those countries with per capita income of US$ 955 or less are called low-

income countries.

• MIDDLE INCOME COUNTRIES

• India comes in the category of low middle income countries because its per

capita income in 2017 was just US$ 1820 per annum

The limitations of the per capita income criteria of development:

(i) Per capita income is the average income of a country.

(ii) Per capita income criteria takes into account only the economic aspect of life and

ignores the social, aspect of life.

(iii) Per capita income criteria ignores education, health, life expectancy, sanitation

etc.

(iv) Per capita income criteria also ignores non material things like peace, pollution

free environment, democracy, etc.

(v) Though Punjab has higher per capita income as compared to Kerala but it has

been ranked lower on Human Development Index because it is far behind than

Kerala in literacy rate and has higher infant mortality rate than Kerala.

Criteria used to compare the different countries by the Human Development Report

published by the United National Development Programme (UNDP)

Per capita income, life expectancy at birth, literacy rate and other basic necessities like clean

drinking water, sanitation etc.

Two important aspects of our lives other than income:

Health and Education.