India Employment Report 2024<\/a>, about 82% of India\u2019s workforce is informally employed, meaning many lack contracts, social security or stable wages.<\/p>\nEven broader estimates that include unincorporated and casual work push this figure toward 90%, reflecting how pervasive informality continues to be in the jobs market. Meanwhile, around 36.87% of Indians lived in urban areas in 2024, compared with about 61% in China, highlighting how limited urbanisation can slow wage growth by keeping large sections of the population in lower-productivity work.<\/p>\n
These factors explain why India\u2019s per capita income lags. They also show why the lag is not proof of weak GDP growth but proof of how much transformation remains ahead.<\/p>\n
Sharma highlights that India\u2019s rise, like China\u2019s before 2010, has been driven \u201cmainly by population scale, steady growth over decades and market expansion, not high individual productivity.\u201d<\/p>\n
Big economies get big before most citizens get rich. That is the phase India is in.<\/p>\n
THE GAP IS A PHASE, NOT A CONTRADICTION<\/p>\n
The distance between India\u2019s rising GDP and its modest per capita income is often read as a contradiction. Economists argue it is more of a sequencing issue. Countries with large populations usually see total output expand faster than individual incomes in the early stages of development.<\/p>\n
India fits that pattern. Several long-running shifts are already reshaping the base of the economy. Financial inclusion has deepened, with more than 500 million Jan Dhan accounts now open.<\/p>\n
Digital payments have become mainstream, crossing 100 billion UPI transactions a month. The GST regime has widened the tax net and nudged more firms into the formal system. Manufacturing interest has picked up as companies look beyond East Asia, helped in part by incentive schemes.<\/p>\n
Economists say these changes matter because they push more activity into higher-productivity zones. Higher productivity is what eventually lifts wages, and wages are what lift per capita income.<\/p>\n
This is the context in which Sharma cautions against treating the per capita gap as a verdict. \u201cOveremphasising per capita income risks undermining confidence in long-term growth,\u201d he says. In his view, development does not move in lockstep. \u201cEconomic scale often precedes mass affluence.\u201d<\/p>\n
Sharma also argues that dismissing India\u2019s GDP because per capita income is low misses what economic size actually enables. A large GDP, he says, \u201cconfers strategic autonomy, supports industrialisation through deep domestic markets and creates growing fiscal headroom over time.\u201d That fiscal room is what allows governments to invest in the public goods that eventually raise household prosperity.<\/p>\n
Seen through this lens, the gap between GDP and per capita income is not evidence of imbalance. It is the shape of a transition that large economies typically pass through, especially those still moving labour from low-productivity work to more productive activity.<\/p>\n
WHY PER CAPITA STILL MATTERS<\/p>\n
None of this diminishes the urgency of raising individual incomes. Per capita income determines daily comfort and shapes social stability. Without faster improvement, poverty reduction slows. According to the World Bank, extreme poverty in India has fallen below 3%, but rising per capita income is essential for people to move securely into the middle class.<\/p>\n
Sharma is blunt about the risks. \u201cPer capita income remains politically and socially decisive,\u201d he says. If incomes do not rise, \u201cmiddle class expansion stalls and social pressures intensify.\u201d<\/p>\n
India\u2019s demographic dividend also carries a deadline. Nearly two-thirds of the population is under 35, but this advantage will fade by the mid-2030s. Without more productive jobs, Sharma warns, India could face \u201ca large underemployed workforce and a form of middle-income stagnation.\u201d<\/p>\n
This is why the per capita argument remains important. Not to dilute the GDP story, but to shape its next chapter.<\/p>\n
WHAT INDIA MUST DO NEXT<\/p>\n
Sharma argues that India needs what he calls a dual-metric approach. One metric, total GDP, captures economic scale. The other, per capita income, captures how that scale translates into people\u2019s lives. Both are required to understand where the country stands.<\/p>\n
The broad direction is not in dispute among economists. Productivity has to rise, and that requires more labour-intensive manufacturing, better skilling systems and stronger urban centres. MSMEs will need to formalise to grow, and India\u2019s female labour force participation, which the PLFS 2023\u201324 places at around 41%, has room to rise.<\/p>\n
These are long-term shifts, and they require sustained fiscal room. That is where scale matters. As Sharma puts it, \u201ceconomic size matters only when converted into capability and opportunity.\u201d Large economies can generate the resources needed for public investment, and that investment shapes the conditions that eventually lift incomes.<\/p>\n
India is moving toward the position of the world\u2019s third-largest economy. Its per capita income remains low by global standards. Both facts can sit together without contradiction. One describes the country\u2019s expanding footprint in the global economy; the other captures the distance that remains in improving living standards.<\/p>\n
“Scale without rising individual prosperity is politically fragile and socially incomplete,” Sharma explains. For him, the task is to keep the focus on both sides of the story: recognise the importance of economic scale while steadily working on the factors that raise household incomes.<\/p>\n
In that sense, the rise in GDP is not an endpoint. It is part of the mechanism that will help support the harder work of broadening prosperity. One milestone shows the base India has built. The other shows the journey still ahead.<\/p>\n
– Ends<\/p>\n
Published By: <\/p>\n
Koustav Das<\/p>\n
Published On: <\/p>\n
Jan 25, 2026<\/p>\n
Tune In<\/p><\/p>\n","protected":false},"excerpt":{"rendered":"India may be racing toward the position of the world\u2019s third-largest economy, yet one worry keeps resurfacing: why…\n","protected":false},"author":2,"featured_media":429305,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,101,38473,203900,23396,203901,178397],"class_list":{"0":"post-429304","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-gdp-growth","11":"tag-gdp-growth-news","12":"tag-indian-economy","13":"tag-per-capita-income-debate","14":"tag-third-largest-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/429304","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=429304"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/429304\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/429305"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=429304"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=429304"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=429304"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}