Per capita income

Also called: Average income, Per capita output · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 10, Ch 1 "Development"; Class 10, Ch 2 "Sectors of the Indian Economy"; Class 11, Ch 1 "Indian Economy on the Eve of Independence"; Class 11, Ch 4 "Human Capital Formation in India"; Class 11, Ch 8 "Comparative Development Experiences of India and its Neighbours"

Meaning

Per capita income is the average income of one person in a country. You get it by dividing the country's national income by its population.

Per capita income = National income ÷ Population

It matters because a country's total income tells you little on its own. A big country can have a large total income and still have poor people. Per capita income adjusts for population size, so you can compare living standards across countries and across years. But it is only an average, so it hides inequality.

Explanation

How it works

• Step 1: find national income. In NCERT terms, national income (NI) is NNP at factor cost (NNP_FC). This is the sum of all factor incomes (wages, rent, interest and profit) that belong to the country's residents.
• Step 2: divide by population. The result is the income "per head" (per capita means "per head" in Latin).
• The chain behind the numerator:
• GDP → (+NFIA) → GNP → (−depreciation) → NNP_MP → (−net indirect taxes) → NNP_FC = NI.
• NFIA (net factor income from abroad) = income Indians earn from work or investment abroad − income foreigners earn from work or investment in India.

• Depreciation is the wear and tear of machines and buildings.

• Other per capita measures: you can divide any aggregate by population. So there is per capita GDP, per capita NNI and per capita GNDI. Each one answers a slightly different question (see "Don't confuse with").

Worked example: why the average can mislead

• Country A: 5 people earn ₹20,000 each.

• Total = ₹1,00,000. Per capita income = ₹1,00,000 ÷ 5 = ₹20,000.

• Country B: 1 person earns ₹92,000 and 4 people earn ₹2,000 each.

• Total = ₹1,00,000. Per capita income = ₹20,000.

• Lesson:

• Both countries have the same per capita income.
• In Country B, 4 out of 5 people are very poor.
• The average hides how income is shared out.

What makes it rise or fall

• National income grows faster than population → per capita income rises.
• Population grows faster than national income → per capita income falls, even if total income is rising.
• Inflation raises the nominal figure without making anyone better off.
• Nominal (current prices) = measured at this year's prices.
• Real (constant prices) = measured at the prices of a fixed base year, so the effect of rising prices is removed.

• Use real per capita income to judge whether people are truly better off.

• Changes in NFIA and depreciation: bigger outflows of profit and interest to foreigners, or faster wear of capital, lower net national income. So per capita NNI falls behind per capita GDP.

In India

• Who measures it: the National Statistics Office (NSO) under MoSPI publishes per capita NNI and per capita GDP each year with the national accounts.
• Latest figures (new base 2022-23, current prices):
• Per capita NNI was ₹1,92,774 in 2024-25 (First Revised Estimate) and ₹2,08,090 in 2025-26 (Provisional Estimate) [2].
• Per capita GDP was ₹2,43,803 in 2025-26 [2].
• Per capita GNDI was ₹2,49,195 in 2025-26 [2].

• The population used in the estimate was 1,421 million in 2025-26 [2].

• Check with real data (2025-26):

• NNI ₹2,95,62,127 crore ÷ 1,421 million people ≈ ₹2.08 lakh per person. This matches the official figure (derived from [2]).

• Real vs nominal (2025-26):

• At constant (2022-23) prices, per capita NNI was ₹1,93,480, up 6.8% [2].
• At current prices the growth was 7.9% [2].

• The gap of about 1.1 percentage points is inflation.

• Old vs new series: NCERT gives about ₹2.05 lakh for 2024-25. That figure came from the old 2011-12 base series. The new 2022-23 base series was released on 27 February 2026 [2][3].

• States: a state's per capita income is its per capita NSDP.
• Net State Domestic Product (NSDP) = GSDP − depreciation.
• GSDP (Gross State Domestic Product) is GDP for one state.

• When the national base year changes, states move their GSDP to the same base so that state and national figures can be compared [3].

• Global use: the World Bank ranks countries by income per head (it uses GNI per capita) to group them as low, middle or high income. NCERT Class 10 (Development) uses the same idea.

Don't confuse with

• Per capita GDP vs per capita NNI: per capita GDP counts all output inside India, including profits that foreign owners take out, and it does not subtract depreciation. Per capita NNI does both, so it is lower (₹2,43,803 vs ₹2,08,090 in 2025-26) [2].
• MoSPI's per capita NNI vs NCERT's "per capita national income": MoSPI's NNI = GNI − CFC (consumption of fixed capital, the official name for depreciation). It is built from market prices, so it equals NNP_MP in NCERT terms, not NNP_FC [2][3]. Always check which definition a question uses.
• Per capita GNDI: this adds net current transfers from abroad, mostly remittances, to NNP_MP. India receives large remittances, so per capita GNDI (₹2,49,195) is higher than per capita GDP (₹2,43,803) in 2025-26 [2].
• Personal disposable income (PDI): per capita income is an earned average. PDI is what households actually have to spend or save, after removing undistributed profits, corporate tax and personal taxes, and adding transfers such as pensions.

Prelims Hooks

• Formula: Per capita income = National income ÷ Population. NCERT defines national income as NNP at factor cost.
• MoSPI's per capita NNI was ₹1,92,774 in 2024-25 and ₹2,08,090 in 2025-26 (current prices, base 2022-23) [2].
• Ranking in 2025-26: per capita GNDI (₹2,49,195) > per capita GDP (₹2,43,803) > per capita NNI (₹2,08,090) [2]. Remittances push GNDI above GDP. Negative NFIA and depreciation push NNI below GDP.
• Trap: a rise in per capita income does not prove that inequality or poverty has fallen. It is an average.
• Trap: per capita income growth at current prices (7.9% in 2025-26) includes inflation. Real growth was 6.8% [2].
• State per capita income = per capita NSDP, not per capita GSDP.

Mains Points

• Averages hide distribution:
• Per capita NNI rose to ₹2,08,090 in 2025-26 [2], but a few very rich people can raise the average while most people stay poor.
• Welfare analysis therefore needs household-level data (PLFS, household consumption surveys) alongside national accounts.

• This is why NCERT (Development) adds health and education measures such as the Human Development Index (HDI) and the infant mortality rate to income.

• Which per capita measure shows welfare?

• India pays out more factor income abroad than it earns, and it receives large remittances.
• So per capita GDP overstates what residents earn, while per capita GNDI shows what they can spend.

• Policy should track per capita GNDI and PDI, not just GDP growth. Ways to raise them include lowering the cost of sending remittances, and transfers such as DBT and pensions, which add to personal income without adding to GDP.

• Population and growth together: per capita income rises only when national income grows faster than population. This links to the demographic dividend: if the growing workforce is healthy, skilled and employed (human capital formation), both total and per capita income rise.

Related concepts

• Gross National Product
• Net factor income from abroad
• Normal residents
• Domestic territory
• Net Domestic Product
• NDP at factor cost
• Net National Product
• GNP at factor cost
• National income
• Personal income

Read more

• From GDP to personal disposable income: the aggregates chain