2 days ago
Don't count countries above India in per capita GDP. Look at the population instead
As we celebrate India's GDP reaching the fourth position, it is equally important to understand how this was made possible and how the Indian economy can be made stronger by learning from the contemporary world and history.
For international comparison, another universally accepted figure is GDP in purchasing power parity (PPP) terms. On the PPP scale, India had become the third-largest economy much earlier, in 2011. This happened because the purchasing power of the Indian rupee in India is nearly four times the market value of the dollar. According to the World Bank, India's GDP (PPP) in 2014 was approximately $7.4 trillion, which has increased to $17.4 trillion in 2025.
In 2014, India was the 10th largest economy in the world, with a GDP of $2.07 trillion. In 2025, it became the fourth-largest economy with a GDP of $4.18 trillion—in merely 11 years, according to NITI Aayog's CEO BV Subrahmanyam.
India's per capita income—and the population
It is argued in some circles that though India has surpassed Japan in GDP, the latter's per capita income is still 11.6 times more than India's. However, if we compare the per capita income of these two countries on a PPP basis, Japan's per capita income is only 4.16 times that of India's GDP per capita.
There is yet another view that we need not celebrate this achievement because India still stands at 136th position in terms of per capita GDP in nominal terms, and even in purchasing power parity, it is placed at 119 in the list of 190 countries. But these numbers reveal less than they hide.
Instead of counting the number of countries above India in terms of their per capita GDP, it would be more appropriate to look at the population of those countries, because poverty transcends national boundaries and our resolve should be to eradicate poverty for all.
Most of those above India in per capita GDP are high-income and middle-income countries; their number is large, though the population residing in those countries is much less. There are 18 populous countries that have per capita GDP above India, with a total population of nearly 3.4 billion, while the remaining 100 countries have a total population of only 14 crore (0.14 billion)—that is, 3.54 billion, or just 43 percent of the world population.
Thanks to the higher rate of growth of per capita income, both in nominal terms as well as in PPP terms, India is rising fast on the ladder. In 2014, India ranked 147th out of 190 countries in per capita GDP in nominal terms; by 2025, its position has improved to 136th. And in per capita GDP in PPP terms, India has moved up from 126th position in 2014 to 119th now.
Also read: India's GDP victory over Japan is still a year away. Here's why
India's success in poverty reduction
Another point we need to elaborate is the well-being of Indians in absolute terms, and also the well-being of those with much higher GDP per capita.
In this context, there is yet another bright spot of the Indian economy in terms of its achievement in eliminating extreme poverty. The most notable improvement we see is in terms of the stark reduction in multidimensional poverty, as per the definition of UNDP. According to the Global Multidimensional Poverty Index (MPI) 2015 (based on 2005-06 and 2011-12 data), around 41.3 percent of India's population was multidimensionally poor in 2005-06. Major deprivations were manifested in nutrition, child mortality, years of schooling, sanitation, and cooking fuel.
With rural poverty significantly higher than urban poverty, India accounted for over 30 percent of the world's multidimensionally poor. UNDP reports that between 2005–2006 and 2019–2021, India's Multidimensional Poverty Index (on a scale of 1.000) plummeted from 0.283 to just 0.069—perhaps the fastest reduction among countries facing acute multidimensional poverty. Interestingly, the UNDP has praised India for this achievement.
As per NITI Aayog's Multidimensional Poverty Index Report (2023) and the UNDP Global MPI 2023, the headcount ratio was reduced to 11.28 percent (as of 2022–23), and 24.82 crore people exited multidimensional poverty between 2013–14 and 2022–23. Deprivations fell significantly in terms of access to electricity and clean cooking fuel, sanitation, housing, school attendance, maternal and child health. Bihar, Uttar Pradesh, Madhya Pradesh, and Rajasthan saw the highest reduction in multidimensional poverty.
If we look at extreme poverty (people with a daily income of $2.15), according to the World Bank's latest report (2025), India has virtually eliminated extreme poverty by global standards. In 2011, an estimated 27.12 percent of India's population lived in extreme poverty—approximately 34.45 crore people. Extreme poverty has come down to around 5.3 percent by 2022-23, that is, an estimated 7.52 crore people live in extreme poverty in the country.
But this is the scenario of extreme poverty in India at a time when the World Bank has raised the threshold for extreme poverty from $2.15 to $3 per day. This implies that if we retain the earlier threshold of $2.15, the proportion of people living in extreme poverty would be hardly 2.3 percent of the population—about 3.36 crore people. This reduction has been made possible due to direct benefit transfers (DBT), free food distribution, and access to basic services—namely sanitation, health, banking, and electricity.
Some argue that GDP numbers showing India becoming the fourth-largest economy are at odds with the government distributing free rations to more than 80 crore people. But we have to understand that the distribution of free food is not unique to India. Even in developed countries like the US and the UK, a significant proportion of the population enjoys free rations.
In fiscal year 2023, the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps, served an average of 4.21 crore people per month in the US, representing 12.6 percent of the population. In the UK, during 2022-23, around 23 lakh people (approximately 3 percent of the population) lived in households that had used a food bank in the previous 12 months. This included 6 percent of children, 3 percent of working-age adults, and about 1 percent of pensioners.
Also read: GDP data revisions—why India still struggles with sharp variations
Global poverty trends and India's achievement in context
An interesting trend is emerging in present-day developed countries: poverty has been increasing over the years, and this trend has accelerated since the 2008 economic crisis. According to the US definition of the poverty line, nearly 18 percent of the population lives in poverty—and the situation is not much different in many European countries. UNICEF reports that between 2014 and 2021, child poverty increased sharply in some of the world's richest nations. Notably, the UK saw a 20 percent rise in child poverty, while France, Iceland, Norway, and Switzerland reported increases of around 10 percent.
When it comes to relative poverty and inequality, OECD data show significant variation across countries. For example, the US has a relative poverty rate of 18 percent, whereas countries like Denmark and Finland report much lower rates, between 5 and 7 percent. Women and the elderly are especially vulnerable, with disproportionately higher poverty rates observed in these groups. In Norway, despite generally low overall poverty, the rate increased from 7.7 percent to 9.7 percent between 2013 and 2017. In Australia, as of 2019–2020, 13.4 percent of the population lived below the relative poverty threshold, including 16.6 percent of children under 15.
While it is certainly a reason to celebrate that India has become the world's fourth-largest economy—and is poised to become the third-largest within the next 2–3 years—this economic milestone is only part of the story. India's progress in reducing both multidimensional and extreme poverty is equally, if not more, significant. These reductions have occurred at a much faster pace than in many peer countries. Although the road ahead is long, the journey so far has been remarkable. It is important to acknowledge these facts so that we may continue on the right path with clarity and purpose.
Ashwani Mahajan is a professor at PGDAV College, University of Delhi. He tweets @ashwani_mahajan. Views are personal.
(Edited by Prashant)
