The limitation of ‘GDP per capita”

Subject: 💰 Economics
Type: Analytical Essay
Pages: 4
Word count: 1088
Topics: 💳 Microeconomics, 💵 Finance
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The Gross Domestic Product (GDP) per capita of a country takes into account the earnings of an individual person of that country over the period of a year. In this paper, a comparison will be made of the GDP per capita of the India, a developing nation and the United Kingdom (UK) a developed nation. The state of the country as a whole as a result of this GDP per capita will be the main focus.

The differences in income earned between people in the developed world and people in the developing world have been the subject of much research in the past (Maddision, 1983). India is a developing country located in the Indian Ocean.  It is a former colony of Great Britain. India has an open market economy.  In recent years, there has been much economic liberation such as privatization of former governmentally owned ventures, a reduction in foreign trade and development and deregulation industrially. This linearization was set in motion in the early 1990’s and has worked well to increase the growth rate of the country as a whole. The growth rate of the country has stayed at an approximate 7% every year since the year 1997. India has managed to accomplish significant economic growth in the past decade or so (CIA-The World Factbook, 2011).

The economy of India covers a multitude of things like modern agriculture, traditional village agriculture, a number of different services ad handicrafts. A comparison of GDP by sector in the country showed that whole over half the country works in the agricultural field, it contributes to only 16.1% of the country’s GDP. Industrial activities contribute about 28.6% where as the sevice industry makes up a bulk of the economy contributing 55.3%. All of these values are figures from the year 2010.  This is particularly evident in that India has a large percentage of the population who speak English and has become a player in the global field in the export of information technology services and software personnel (CIA-The World Factbook, 2011).

In light of the recent economic crisis, India was seen to bounce back in 210 as growth actually went above 8% in 210 and due to a demand for services domestically.  In fact, India has the second highest labour force in the world with an approximate 478.3 million wanting to work. The unemployment rate was fairly low compared to the rest of the world in 2010 with it staying at 10.8% (118th place in the world) (CIA-The World Factbook, 2011).

Despite doing relatively well on the economic front, India has numerous issues to deal with within the country. Parts of India are becoming increasingly overpopulated, there has been much destruction the environment and there is widespread poverty. A staggering 25% of the country’s population lives in poverty (CIA-The World Factbook, 2011). In addition, corruption seems to plague the country of India. There is also seen to be a lack of physical and social infrastructure in certain parts of the country and there is not enough access to higher education. There is a widespread migration from rural to urban areas dues to a lack of jobs in the agricultural sector (CIA-The World Factbook, 2011).

The GDP per capita of India is about $ 3400 as of 2010. In comparison to the rest of the countries of the world, this is 163rd place. The GDP per capita the UK, on the other hand is $35 100 and was 36th place in the world. This is a marked difference from India and a comparison will be made of these two countries (CIA-The World Factbook, 2011).it has been argued that developed countries such as the UK, already had a much higher lead to economic growth than to developing countries who growth started only relatively recently (Maddison, 1983).

The UK is a group of islands located in Western Europe. In stark contrast to India, the GDP contributions by sector are extremely different. Only 0.9% of the GDP comes from agriculture, 22.1% of the GDP is as a result of industrial ventures and a very high 77.1 is from the service industry. In terms of growth, the industrial production growth rate was only 1.9% in2010 compared with India where it was over 10% (CIA-The World Factbook, 2011).

The UK has a workforce of 31.45 million or the 19th largest workforce in the world.  The unemployment rate is less than in India with a 7.4% unemployment rate being reported in 2010 (86th place in the world) (CIA-The World Factbook, 2011). 14% of the population of the UK live below the poverty line compared with 25% in India (CIA-The World Factbook, 2011).

The UK has been described as having the third largest economy in Europe followed only after Germany and France. In the past few decades, the government has worked to enhance social welfare programs and to reduce public ownership (CIA-The World Factbook, 2011).

The agricultural sector is exceptionally efficient. Under 2% of the workforce of the country works in this sector but produces about 60% of the countries food requirements. The agricultural programs are extremely mechanized, quick and very efficient.  The service industry, including banking, makes up a huge bulk of contribution to the GDP of the country. The industrial sector, ion the other hand continues to go down in importance in recent years. Since 1992, there was a rapid economic expansion for UK. Much of the growth was higher than growth is rest of Europe. However, the recent recession has slowed this down considerable (CIA-The World Factbook, 2011).

In fact, the UK has been besieged by numerous problems as of late due to the financial crisis including but not limited to hugely declining prices of homes, a high level of consumer debt amongst others. Several steps have been taken y the government to reduce the ill effects of this such as the cutting of taxes, nationalizing come of the banking system, temporary suspension of public sector borrowing and spending more on capital generating projects (CIA-The World Factbook, 2011).

To conclude, the GDP per capita of India was about $3400 in 2010 while in the same year the GDP per capita of the UK was $35 100. India is still a developing country but the UK is a developed country which is a major economic hotspot in Europe. With regards to the conditions in each country, it is undoubtedly the case that the UK has more financial resources for its citizens and the standard of living is higher. However, it must be noted that will the UK has a much larger GDP per capita than India, the growth rate of the economy in India was about 10 times higher than in the UK in the past decade or so implying that India will become a major player in world economics if it continues at this rate.

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  1. CIA-The World Factbook. 2011. Online. Accessed <>. [10 May 2011].
  2. Maddison, Angus. 1983.  A Comparision of Levels of GDP per Capita in Dveleoping and Devloping Countries, 1700-1980. The Journal of Economic History. 43 (1). 27-41.
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