Interim budget may focus on measures to increase GDP per capita
The most accurate measure of economic prosperity of a country is its GDP per capita or per capita income. It is calculated by dividing the total GDP of the country by its total population. Due to India’s large population, its per capita GDP remains low in spite of its large GDP.
The budget that will be presented by the central government on 1st February, 2024 will be Interim Budget. It is the budget just before the general elections. Elections will be held in May 2024. Therefore, the likelihood is high that the government may focus on measures that improve the per capita income of Indians, especially those living in rural areas.
India’s GDP per capita growth rate has slowed down
According to data from The Economist, per capita GDP growth of India, after adjusting for purchasing power parity, was 6.2% annually in the period between 2004-2013. Between 2014-2023, this growth rate came down to 4.3% annually. This area should therefore be one of focus areas for the Budget.
Measures that can give a boost to GDP per capita
More job creation is needed for increasing per capita income of Indians. This requires measures that give a boost to GDP growth. Higher GDP growth also gives a push up to GDP per capita or per capita income. One way to give boost to job creation and GDP growth is to increase the ease of doing business. In the past 10 years, the incumbent government has taken a number of measures to increase ease of doing business in India. More needs to be done. India still ranks low in ease of doing business rankings. In its most recent Ease of Doing Business rankings available, World Bank ranked India 63rd out of 190 countries in ease of doing business.
The budget may also announce more incentives for investments in different industries and sectors so that the pace of job creation can be accelerated. This measure is particularly needed as prevailing high interest rate scenario has hurt investments in the private sector. Cutting down of corporate tax rate further may also give a boost to investments in the private sector.
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