Question

WHY DO SOUTH ASIA HAS A LOWER INCOME PER CAPITA THAN SUB-SAHARAN AFRICA AND DOES THE LEVEL AND RATE OF GROWTH OF GNI AND PER CAPITA INCOME PROVIDE SUFFICIENT MEASURES OF A COUNTRY'S DEVELOPMENT?

Answer 1

Part A

We know that the south Asian has lower income per capita compared to sub Saharan Africa. It is based on the purchasing power parity; the number of people living in South Asia has 50 percent higher than that of Sub Saharan African countries. The absolute purchasing powers of people in South Asia lower because of higher population growth. The number of people living in below poverty line is also higher compared to sub Saharan Africa.

Part B

The level of growth of GNI is not the complete measure of development of the country. It has provided the indicator that is closely correlated with other. It takes into account the nonmonetary measures like life expectancy of birth, mortality rates of children and enrolment rates in schools. The GNI measures reflected the problem of income inequalities among the countries. Usually the GNI measures calculated on the basis of Atlas method, means local currency converted by US dollar based on countries exchange rates, so domestic price level does not takes into account.

Part C

We know that per capita income is the average income of people in a country. It calculated by total national income divided by the population. The economists like Baran, Rostow, Leibenstein, etc accepted the per capita income is the measure of development. But in the real case per capita income is not the good measure of development. It is because PCI does not reflect the standard of living of the people. The increase in PCI does not raise the standard of living of the people, if it is possible when PCI increasing per capital consumption of goods and services might be falling. Also it does takes into account the education, health, work-leisure ration, etc.