GDP's Fine, But About Net Income?

The Indian economy remains on the fast track, with the Reserve Bank of India pegging the 4th quarter growth at 7.4 per cent, taking the 2025 fiscal growth to 6.5 per cent. This is after the Indian economy had cruised along at 9.2 per cent (FY 2024), 7.2 per cent (FY 2023) and 8.7 per cent (FY 2022).

So, how does this place us on the global arena, as we get ready to sail past Japan and stake a claim to becoming the fourth largest economy in the world? According to IMF projections, India’s GDP, the common denominator for the valuation of a country’s economy, at $3.9 trillion, is playing catch-up with Japan, at $4.02 trillion. What has warmed the cockles of Indian hearts is the April edition of the IMF’s World Economic Outlook report that India’s GDP for FY 2026 is expected to touch $4,187 billion, which will be marginally above $4,186 billion of Japan by the 2025 calendar. Evidently, that is also what got the Niti Aayog to famously claim that India had pipped Japan and the race would now be with Germany for the third place.

Surely, the fruits of hard labour need to be savoured and the dividends cherished. But, as we bask in the glory of this India Shining chronicle, where the elephant that was our economy is now a distant memory, any reference to dividends requires the circumspect stakeholders to take a hard look at the numbers, if nothing else, to make sure nothing has been glossed over. Far from raining on the parade, this elephant-turned-tiger resurgent economy narrative clearly needs to factor in a few more indices, notable among them being the net yield to the stakeholder. In corporate parlance, no matter what the topline growth, what really matters in the balance sheet is the profit quotient.

Thus comes into play the per capita income as the basis of ranking countries on an economic scale. Here is how the world’s five largest economies fare: The US, with a net income of $89,110, is 10th, while Germany is 18th ($69,000), followed at a distance by Japan ($33,956). Meanwhile, the world’s second-largest economy, China falls way behind in the rankings ($15,678), and India languishes at the bottom of the heap with a nominal per capita GDP of $2878, with only about 50 of the 194 countries featuring behind it. Yes, Indian net income, when denominated by purchasing power parity, would be $12,132. True, but then there would be a similar escalation in the corresponding figures of others too, especially China and Japan. Clearly, India has some distance to go in terms of minimising income disparity, the macro numbers notwithstanding.