In a recent study conducted by economists from SBI Research, it has been projected that India’s per capita income is poised for a significant surge. The study indicates that by the fiscal year 2047 (FY47), India’s per capita income is anticipated to rise by 7.5 times, reaching Rs 14.9 lakh ($12,400) annually, a substantial increase from the current Rs 2 lakh ($2,500) recorded in FY23.
India’s Per Capita Income Increased by 7.5 times by FY 2047
Striving Towards Development: A National Endeavor
Aiming to climb into the ranks of developed economies by FY47, the Indian government has set forth this ambitious goal. Prime Minister Narendra Modi emphasized the significance of the next five years in his pre-2024 general elections Independence Day speech, underscoring their pivotal role in accomplishing India’s 2047 vision.
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PM Modi’s Aspiration: A Shared National Resolution
In his proclamation, Prime Minister Modi expressed that the vision of a developed India by 2047 is not just a mere aspiration, but a collective determination shared by the 1.4 billion Indian citizens.
Rising Income Trends: A Transformational Shift
According to the SBI study, a noteworthy transformation is anticipated in the weighted mean income of tax filers. The study suggests that by FY47, the mean income is projected to reach Rs 49.9 lakh, a substantial increase from Rs 13 lakh in FY22. This growth is attributed to the transition of the economy from a lower-income group to an upper-income group, along with tax buoyancy. The study also highlights the role of formalization catalyzed by the Goods and Services Tax and the UDYAM portal for MSMEs, which is propelling the surge in income tax returns.
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Expanding Tax Base: Shifting Dynamics
The number of tax filers has witnessed a remarkable surge, reaching 85 million in FY23 from a mere 2.1 million in FY13. The economists at SBI anticipate this number to further escalate to 482 million by FY47. This surge is expected to elevate the proportion of the taxable workforce from 22.4% in FY23 to 85.3%, fostering a more comprehensive tax base.
Evolving Income Strata: A Changing Landscape
The study reveals a shifting landscape in income strata. Notably, the number of individuals filing zero tax returns is projected to decrease by 25% by FY47, with many transitioning to the next income bracket.
Between FY11 and FY22, a significant transformation is evident as 13.6% of individuals moved from the lowest income bracket (below Rs 5 lakh), with 8.1% entering the Rs 5-10 lakh range, and 3.8% advancing to the Rs 10-20 lakh bracket.
Dynamics Across States: State-Level Insights
The study underscores the role of different states in shaping these trends. Maharashtra, Uttar Pradesh, Gujarat, Rajasthan, and West Bengal are highlighted as the key contributors, collectively accounting for nearly half of the total returns filed by FY22.
Embracing Migration: A Boost to State Economies
The study extols the positive impact of migration on state economies. It notes that migrating populations contribute 0.5-2.5% of the Gross State Domestic Product (GSDP) in individual states. This migration has proven advantageous for six states, experiencing a net positive impact.
Optimizing Migration Benefits: A Call for Consideration
The economists at SBI emphasize the importance of acknowledging the place of work as a distinct category in income tax filings. This consideration is deemed essential for a comprehensive understanding of the benefits associated with migration.
In conclusion, the study illuminates a promising path for India’s economic evolution, projecting a substantial increase in per capita income by FY47. As the nation embarks on this transformative journey, embracing migration and optimizing its benefits stand out as crucial strategies for India’s future prosperity.
Unveiling India’s Economic Evolution
India’s Economic Journey: From Planned to Social Market Economy
India’s economic landscape has evolved from a mixed-planned economy to a mixed middle-income developing social market economy, with significant participation from the public sector in strategic domains and indicative planning.
Notably, India boasts the fifth-largest nominal GDP and the third-largest GDP based on purchasing power parity (PPP) globally.
Economic Liberalization and Growth
Following its independence in 1947 until 1991, India’s economic policies mirrored the Soviet model, characterized by protectionism, state intervention, and bureaucratic enterprises under the umbrella of “Licence Raj.” However, the end of the Cold War and a balance of payments crisis in 1991 prompted India’s shift towards broad economic liberalization and indicative planning.
Economic Performance and Contribution
Since the turn of the 21st century, India has achieved an average annual GDP growth of 6% to 7%. In 2022, India held a 7.2% share of the global economy based on purchasing power parity (PPP) and approximately 3.4% based on nominal terms.
Economic Challenges and Transformations
While India’s economy boasts vitality, challenges persist. The informal domestic economy, COVID-19 impacts, credit access limitations, and inequalities are factors affecting economic growth and poverty reduction. Factors like demonetization in 2016 and the Goods and Services Tax introduction in 2017 contributed to a slowdown in economic growth in 2017. India’s GDP heavily relies on domestic consumption, government spending, investments, and exports. Notably, the nation ranks as the sixth-largest consumer market worldwide.
Trade and Global Presence
In terms of trade, India stands as the world’s sixth-largest importer and ninth-largest exporter as of 2022. The country’s participation in global trade is highlighted by its membership in the World Trade Organization since 1995.
Labor Force and Social Dynamics
India’s labor force, boasting 476 million workers, is the world’s second-largest. However, the country also grapples with extreme income inequality. Moreover, India’s tax culture remains underdeveloped, with a relatively low number of taxpayers relative to its population.
Economic Resilience and Aspirations
During the 2008 global financial crisis, India adopted Keynesian policies, including stimulus measures, to bolster growth and demand. In the quest for sustainable development, India must prioritize public sector reform, infrastructure, agriculture, financial inclusion, private investment, education, and public health.
Trade Partnerships and Manufacturing Power
India’s top trading partners include the United States, China, UAE, and others. The service sector drives over 50% of GDP, while industry and agriculture remain major employers. India stands as the world’s sixth-largest manufacturer, contributing 2.6% of global manufacturing output.
Challenges and Opportunities Ahead
India confronts unemployment, rising income inequality, and challenges in aggregate demand. The nation’s gross domestic savings rate in 2022 reached 29.3% of GDP. Yet, questions have been raised about the accuracy of economic data reporting.
Most Important Points for Competitive Exams
India’s Per Capita Income Growth: Key Points
- Recent SBI Research study projects a remarkable surge in India’s per capita income.
- Anticipated a rise of 7.5 times by FY47, reaching Rs 14.9 lakh ($12,400) annually.
- A significant increase from the current Rs 2 lakh ($2,500) recorded in FY23.
Path to Development: Key Aspects
- The Indian government aims to transform into a developed economy by FY47.
- PM Modi highlights the importance of the next five years for achieving the 2047 vision.
- The vision of a developed India is a collective resolution of its citizens.
Shift in Income Trends: Transformation Highlights
- SBI study predicts a transformation in the weighted mean income of tax filers.
- Estimated mean income to reach Rs 49.9 lakh by FY47, from Rs 13 lakh in FY22.
- The transition from the lower to the upper-income group was aided by tax buoyancy and formalization.
Expanding Tax Base: Noteworthy Trends
- The surging number of tax filers: 85 million in FY23, projected to reach 482 million by FY47.
- Aimed to increase the taxable workforce from 22.4% in FY23 to 85.3%.
- The decline in zero tax returns, with transitions to higher income brackets.
State-Level Insights: Economic Dynamics
- Maharashtra, Uttar Pradesh, Gujarat, Rajasthan, and West Bengal lead in contributions.
- These states account for nearly half of the total returns filed by FY22.
Migration’s Impact: State Economies Benefitting
- Migration contributes 0.5-2.5% of GSDP in individual states.
- Six states experience a net positive impact due to migration.
Optimizing Migration Benefits: Call to Action
- Acknowledging work location in tax filings is essential for understanding migration benefits.
Economic Evolution and Future Prosperity
- Projected significant increase in per capita income by FY47.
- Embracing migration and optimizing its benefits is vital for India’s future prosperity.
Economic Journey: Highlights
- The transition from mixed-planned to a social market economy.
- Fifth-largest nominal GDP and third-largest GDP (PPP) globally.
Challenges and Focus Areas
- Informal domestic economy, COVID-19 impacts, credit access limitations, and inequalities.
- Economic growth slowed due to demonetization and GST introduction.
- Government focuses on public sector reform, infrastructure, agriculture, and financial inclusion.
Trade and Global Presence
- Sixth-largest importer and ninth-largest exporter in 2022.
- Member of the World Trade Organization since 1995.
Labor Force and Social Dynamics
- Second-largest labor force with 476 million workers.
- Struggle with extreme income inequality and underdeveloped tax culture.
Manufacturing and Trade Partnerships
- World’s sixth-largest manufacturer, contributing 2.6% of global manufacturing output.
- Key trading partners include the United States, China, UAE, and others.
Challenges and Opportunities Ahead
- Confronting unemployment, income inequality, and aggregate demand challenges.
- The gross domestic savings rate reached 29.3% of GDP in 2022.
- Scrutiny over the accuracy of economic data reporting.