Global economic outlook: Income

PERSPECTIVE | January 09, 2024

Authored by RSM US LLP

The economies in Switzerland, the United States and Sweden are the most innovative and efficient in terms of producing high-value products as measured by gross national income per capita. That is the level of national economic output divided by the population.

Advanced countries—including the U.S., Canada and the UK—are by definition more capable of generating higher-value products than developing countries—like China, Russia and India—that produce basic materials.

That’s not to say that can’t change. China is developing its intellectual capital in regard to high-end semiconductors. India’s industrial policy is advancing its tech field and has the advantage of a highly educated, English-speaking labor force.

Before the pandemic and tariff wars, China’s ascendancy as the factory floor of the global economy allowed its per capita income to grow at an astounding rate of 16.5% per year from 2000 to 2010. During the slow recovery after the global financial crisis and into the pandemic shutdown, China’s per capita income grew at a still robust 9.3% per year. But that growth has recently waned because of that country’s “zero-COVID” policy, debt problems and an aging population.

Similar growth is seen in India’s per capita income, which grew at an average annual rate of 10% from 2000 to 2020. In 2021, India’s per capita gross national income grew by 13.2%, and in 2022 it reached a slower but still strong 10.7%.

The success of India’s economy will likely encourage its government to continue its economic reforms as it looks toward achieving its goal of becoming a developed economy.