"Why the GDP has zero value in my life"; A common man's life

PART 1: GNI and Its Distribution


We are often glad and proud about our -India's- GDP.

But what's there so interesting about GDP in one's daily life???

GDP is the total value of goods and services produced by the employees and companies in a country, in a certain time period. It's a measure of the well being of the economy of a nation. India ranks 7th in GDP with $2 trillion [1]. India is the second fastest growing economy with a growth rate of 6.6% [2].

Very well, what does it say about one's contribution in GDP or in other words, income one gets for hiser contribution in GDP which is one of the crucial measures of a citizen's well being? Or on a large scale the gross national income, GNI■ (which includes income from foreign and excludes if money is not spent within the country [3]). GNI of the nation is $2.24 trillion, based on the data 2016 [4]. 


That's the total income, what's per capita income and HOW IS IT DISTRIBUTED?


The top 20% richest in India earns $124 in a month (per capita) (after income tax reduction), whereas the bottom 20% earns $19 per month! [5]. It becomes more interesting when we look at the percentage of household savings with respect to the disposable income (=income-income tax)! When the top 20% saves 47% of their monthly income, the bottom 20% saves 10% of their monthly income.

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So, the accumulation of wealth highly depends (it definitely has dependence but how strong the dependency is determined by the economic policies and infrastructure) on your income scale, in our current economic environment! When we look at the wealth distribution, the top 1% richest hold 58% of total wealth[6] (which was 54% based on global wealth data book 2014-15, including NRIs! [7],[8],[9]). 

In other words, despite the GDP or the GNI, the top 20% richest enjoy ~45% of the fruit of labor, and the rest of the 55% of the GNI is distributed among the 80% of the population... Similarly, 90% of the population hold barely 42% of the total wealth!

If your income per day is less than 695 INR, you're excluded from income tax [10]. Assume you earn 695 INR per day, then you'll be paying ~35 INR as income tax and your disposable income will be 660 per day. You then belong to the top 20% richest in India (a per capita disposable income of 7974 INR per month is enough for you to be in the top richest list and you earn ~19,800 INR per month!). This is not to say that you're likely to be one of the top 20% richest (especially, if you're from Kerala, a majority of you are likely to earn more than 500 INR per day) but to show the economic extremity! Because Someone with an income 695 INR per day has been positioned in the top 20% along with someone like Mukesh Ambani who's daily earning certainly can't be less than a few thousands of INR if you think with the so called common sense!

HOW WILL YOU SURVIVE IN SUCH A DISASTROUS ECONOMIC ENVIRONMENT, where GDP plays almost no role in your well being? This question is to them who earn a household disposable income less than 560INR per month, who are highly unlikely to be here reading this article; nearly 80% of the population!

In the following parts, we will see how this income distribution may or may not harm you in the modified economic policies like the introduction of GST, or cutting down the subsidies or the budget percentage expenditure in education, healthcare etc 

Footnote 1:

GNI■: GNI from GDP can be calculated as follows

GNI = GDP + (income from citizens and businesses earned abroad) – (income remitted by foreigners living in the country back to their home countries).

Footnote 2:

One of the major drawbacks in the above studies I see is that usage of statistics without publishing the standard deviation. In a group of 100 people, half of them with zero rupees and the other half with 10 rupees gives you an average of rupees 5, and we 're likely to conclude each person holds rupee 5 on an average, which alone gives us almost no clue about the distribution of it!