Author: Siddharth Zarabi & Asit Ranjan
Mishra
Publication: Business Standard
Date: July 20, 2007
URL: http://www.business-standard.com/common/storypage_c.php?leftnm=10&autono=291773
Economic growth and an appreciating rupee
will see India break into the ranks of lower middle-income countries this
fiscal year, a few years earlier than expected.
At $1,021, the Prime Minister's Economic Advisory Council has projected that
per capita income would increase over 25.58 per cent this fiscal, against
$831 in 2006-07.
This would put India in the same category as China, though the latter's per
capita income was estimated at $2,165 in 2006.
This year's projected increase in per capita (in dollar terms) is nearly double
the average 13 per cent growth between 2003-04 and 2006-07. In the same four-year
period, GDP grew an average 8.6 per cent.
Council member and ICRA chief economist Saumitra Chaudhuri said that using
Central Statistical Organisation data, the council arrived at 2006-07's per
capita income in dollar terms assuming an exchange rate of Rs 45 per dollar.
For the current year's projection, the exchange rate assumed is Rs 41 to the
dollar. "It is a commendable achievement, but there is so much to do.
$1,000 is not a big amount these days," he said.
However, World Bank lead economist in India Dipak Dasgupta described it as
a "huge thing" in the broader scheme of things. "It really
is the effect of higher GDP growth. The exchange rate does not have that big
a role," he said.
India is currently classified as a low income country by the World Bank, which
categorises its 185-member countries on the basis of their 2006 gross per
capita into four groups: Low income countries (per capita income of $905 or
less), lower middle-income countries (per capita income between $906 and $3,595),
upper income countries (between $3,596 and $11,115) and high income countries
($11,116 or more).
The bank's income classifications are key to deciding the lending category
of the country concerned.
"This signals that India is no more a poor country - an impression that
was anyway fading away. The International Development Association may reduce
aid as India is up a step on the ladder," said Arvind Panagariya, professor
of economics, Columbia University.
