India is a country of contradictions. On one hand, it has the third largest group of billionaires in the world and a massive consumer market. On the other hand, it has high levels of poverty and deprivation. So is India a rich or a poor country? The answer depends on how we define and measure wealth and poverty.
Measuring wealth and poverty
There are several ways to define and measure the wealth and poverty of countries:
Gross Domestic Product (GDP) per capita
GDP per capita measures the total economic output of a country divided by its population. In 2021, India’s GDP per capita was around $2,277, which puts it in the lower-middle income category according to the World Bank. However, GDP per capita does not account for income distribution within a country.
Human Development Index (HDI)
The HDI measures achievements in three key dimensions of human development – life expectancy, education and standard of living. In 2020, India ranked 131 out of 189 countries with an HDI score of 0.645, putting it in the medium human development category.
Multidimensional Poverty Index (MPI)
The MPI measures poverty across multiple factors including poor health, lack of education, inadequate living standards, disempowerment, poor quality of work, threat from violence, etc. In 2020, 27.9% of India’s population was multi-dimensionally poor.
Gini coefficient
The Gini coefficient measures the extent of income or wealth inequality within a country. A value of 0 represents perfect equality while a value of 1 represents perfect inequality. As of 2019, India had a Gini coefficient of 0.482, indicating relatively high inequality.
Purchasing power parity (PPP)
PPP compares different currencies by their purchasing power. Adjusted for PPP, India’s GDP per capita in 2021 was around $7,333, almost triple the nominal figure. However, inequality remains stark despite the PPP adjustment.
| Indicator | India’s Status |
|---|---|
| GDP per capita (nominal) | $2,277 (2021) |
| HDI | 0.645, Medium (2020) |
| MPI | 27.9% poor (2020) |
| Gini coefficient | 0.482, High inequality (2019) |
| GDP per capita (PPP) | $7,333 (2021) |
So in terms of overall economic output, India would be considered a lower-middle income country. But after adjusting for price differences with PPP, it is better off. On human development and inequality indicators however, India fares poorly compared to many developing countries.
Arguments for India being a rich country
Here are some of the main points suggesting India is a rich and prosperous country:
Large GDP and high growth
India is the sixth largest economy in the world with a GDP of $3.2 trillion (nominal, 2021). It has sustained an average annual growth rate above 6% since 1991, with higher spikes in recent years before the COVID-19 pandemic hit. Rapid growth has lifted millions out of poverty.
Abundant resources and self-sufficiency
India has substantial natural resources, including major deposits of thorium, iron ore, manganese, mica and bauxite. It is self-sufficient in food production. India is also rich in terms of labor resources, with a large skilled English-speaking workforce.
Technological prowess and innovation
India has shown technological innovation and prowess, especially in IT, pharmaceuticals and space exploration. It has a vast pool of scientists and engineers and spends heavily on R&D. As of 2021, India ranked 3rd globally in STEM graduates.
Vibrant consumer market
With a population of 1.4 billion and a rapidly growing middle class, India offers a massive and vibrant consumer market. It has an aspirational and young demographic profile. Rising incomes are driving consumption of goods and services.
Strong services sector
The services sector accounts for over 50% of India’s GDP and provides employment to millions. IT, tourism, healthcare and financial services are major contributors. India has become an outsourcing hub for technology services and call centers.
| Evidence that India is Rich |
|---|
| 6th largest GDP ($3.2 trillion) |
| Average GDP growth above 6% since 1991 |
| Abundant natural resources |
| Large pool of skilled labor |
| Rising consumer market |
| Strong and diversified services sector |
Arguments for India being a poor country
However, there are also signs that large parts of India remain poor and underdeveloped:
Low per capita income
Despite strong GDP growth, India’s per capita income is still quite low. In 2021, GDP per capita was just $2,277, much below the global average and that of other developing countries. Massive population nullifies the gains of aggregate GDP.
Widespread poverty and deprivation
According to World Bank data, about 15% of India’s population lives below the national poverty line. Over 34% survive on less than $3.2 per day (PPP). Malnutrition, lack of sanitation and healthcare access remains high especially in rural areas.
Poor human development outcomes
India’s HDI and MPI rankings reveal poor social indicators and high multidimensional poverty. Over 43% of Indian children under 5 are stunted. Adult literacy rate is only about 74%. Quality schooling and healthcare remain limited for many.
High income and regional inequality
India has among the highest income inequalities in the world based on the Gini coefficient. Wealth is concentrated in a small elite. Disparities between urban and rural areas remain stark. Some states are much poorer than others.
Large unorganized sector with few protections
About 81% of India’s employed population is engaged in the unorganized sector with insecure jobs and little social security. Casual labor and subsistence farming dominate, indicating underdevelopment.
| Evidence that India is Poor |
|---|
| Low GDP per capita ($2,277) |
| 15% population below poverty line |
| Poor health and social indicators |
| High income inequality (Gini 0.482) |
| 81% workers in unorganized sector |
Conclusion
India displays a mix of both prosperity and poverty. In absolute terms, the size of the economy and the growing consuming class make India a lucrative market. It also has islands of excellence in services, technology and innovation. However, per capita incomes, human development and standards of living for a broad swathe of the population remain quite dismal.
Extreme income inequality means prosperity co-exists with deprivation. Rural-urban, gender and state-level disparities remain very high. While an affluent urban middle class has emerged, the fruits of economic growth have failed to sufficiently trickle down to the masses.
So in summary, while India is certainly not a poor country in an aggregate sense, neither is it truly rich when the condition of the average Indian is considered. Rapid growth since the 1990s has lifted millions out of poverty but much progress remains to be made. Sustained high growth and more inclusive policies are essential for India to reach its potential.