Per capita income means the average annual income per person. It is calculated by dividing the national income with total population. Per capita income is used as the basis of classifying economies :
Low Income Economies : Per capita GNP of $ 755 or less in 2000.
Middle Income Economies : Per capita GNP between $ 755 and $2,995 in 2000.
High Income Economies : Per capital GNP of $2,996 or above in 2000.
Per capita income is, however, not a true indicator of a country’s economic position because the purchasing power of different currencies is different currencies is different. GNP and per capital income are estimated at purchasing power parity (PPP) to overcome this problem. For example, India’s per capita income in 200 was estimated at $598 but in terms of PPP it was estimated at $ 2,840. This means $ 598 in India can buy the same bundle of goods which $ 2,840 can busy in USA.
Low income and middle income economies are often referred to as developing economies whereas high income economies are called developed economies.
An urban area is defined as follows : (a) all places with a municipality, corporation, cantonment board or notified town area committee, (b) all other places which satisfy the following criteria : (i) a minimum population of 5,000; (ii) a density of population of at least 400 persons per sq. km.
Urbanisation means the proportion of a nation’s population living in urban areas. It is different from urban growth which refers to increase from 17.3 percent in 1951 to 27.8 percent in 2001, The urban rural ratio of population changed from 1 :4.7 with the developed countries reveals that India is far behind these countries wherein about three-fourths or more of the total population is urban. In the developed countries industrialisation has been the main cause of urbanisation. But in India growth of industries has made little contribution not urbanization. In the West urbanisation was the consequence of large-scale production, introduction of machinery and the growth of industrial civilisation. But in India urbanisation has taken plane largely due to migration of people from rural areas.
Economic development is generally associated with the growth of urbanisation in a country. The impact of urbanisation on economic development can be judged on three criteria : (i) increase in per capita income so that the standard of living is improved, (ii) reduction in the rate and magnitude of unemployment, and (iii) decline in population below the poverty line. Data reveals that growth of urbanisation has led to increase in per capita income. The ratio between per capita income in urban and rural sectors works out to be 2 :1. But urbanisation below the poverty line. Neglect of slums in urban areas, ruthless exploitation of people employed in the unorganized sector, increasing use of capital-intensive technology in urban areas, and concentration of income in a few hands are the reasons for the reasons for this state of affairs.
Deficit Financing (Fiscal Deficit)
An underdeveloped country like India has to spend huge amounts of money on development plans. It is not always possible to raise the required financial resources internally through taxation. Then the country obtains aids and loans from abroad. When these are also inadequate, the Government has to resort to deficit financing.
The term ‘Deficit Financing’ is generally used to refer to the excess of public (government) expenditure over public revenue.
Deficit financing can be useful only when it used to a limited extent and for productive purposes. It may be helpful in promoting economic development in a underdeveloped country in the initial stages. But extreme caution is required to keep the amount of deficit financing under check. Proper controls are necessary to minimize the adverse effects of deficit financing).