CBSE Class 10 · Development

National Development and Per Capita Income Class 10 Economics

Updated 14 October 2026 · Fact-checked

To compare countries, income is considered one of the most important attributes. Because populations differ, we use average or per capita income: total income divided by total population. The World Bank uses it to classify countries as high, middle or low income. But averages hide disparities: two countries with the same average can distribute income very differently.

Both countries average Rs 10,000 a month, but in B one person earns Rs 48,000 and four earn Rs 500, so averages hide disparities.

Illustration drawn for QuestionBuddy.

Understand National Development and Per Capita Income

How do we compare countries? When comparing students, we pick one or more important characteristics depending on the purpose. Similarly, for comparing countries, income is considered one of the most important attributes: countries with higher income are seen as more developed, on the understanding that more income means more of all the things people need.

Total vs average income.

A country's income is, roughly, the income of all its residents: its total income.
Total income is not useful for comparison, because countries have different populations; it does not tell us what an average person is likely to earn.
So we compare average income = total income of the country / total population. This is also called per capita income.

World Bank classification (as given in NCERT). The World Bank's World Development Reports use per capita income to classify countries. NCERT states that countries with per capita income of US dollars 66,500 per annum and above in 2024 are high income or rich countries; those with about US dollars 2,300 or less are low-income countries; and India is in the low middle income category, with per capita income in 2024 of about US dollars 11,000 per annum. Rich countries, excluding the Middle East and certain small countries, are generally called developed countries.

Averages hide disparities (Table 1.2). Two countries, A and B, each with five citizens, have these monthly incomes (in rupees):

Country A: 9,500; 10,500; 9,800; 10,000; 10,200. Total = 50,000; average = 10,000.
Country B: 500; 500; 500; 500; 48,000. Total = 50,000; average = 10,000.

Both have the same average, but in A people are neither very rich nor extremely poor (more equitable distribution), while in B most citizens are poor and one is extremely rich. If a lottery decided our citizenship number, most of us would prefer to live in A. So average income is useful for comparison, but it does not tell us how income is distributed.

Comparing Indian States by per capita income (Table 1.3, 2023-24, per capita net state domestic product at current prices; Economic Survey 2024-25).

Haryana: Rs 3,25,759
Kerala: Rs 2,81,001
Bihar: Rs 60,337

By income alone, Haryana would be the most developed and Bihar the least developed of the three. But other indicators such as infant mortality, literacy and school attendance tell a different story (see the topic Income and Other Criteria).

Limitations of per capita income.
1. It hides inequality in distribution (Table 1.2).
2. A rising average does not mean all sections have become better off.
3. Money cannot buy everything needed to live well, such as a pollution-free environment, unadulterated medicines or protection from infectious diseases; many such goods are best provided collectively.
4. It ignores non-income goals like security, equality and freedom.

National Development and Per Capita Income: key facts

Per capita income: Average income = total income of the country / total population; Also called per capita income.
Why not total income: Countries have different populations, so total income does not show what an average person earns
World Bank classes (as in NCERT, 2024): High income US dollars 66,500 and above
low income about US dollars 2,300 or less
India low middle income, about US dollars 11,000; Rich countries excluding the Middle East and certain small countries are called developed.
Table 1.2: A: 9,500 + 10,500 + 9,800 + 10,000 + 10,200 = 50,000, average 10,000. B: 4 x 500 + 48,000 = 50,000, average 10,000; Same average, different distribution.
Table 1.3 (2023-24): Haryana Rs 3,25,759; Kerala Rs 2,81,001; Bihar Rs 60,337; Per capita NSDP at current prices.

High income	US dollars 66,500 and above
low income	about US dollars 2,300 or less
India	low middle income, about US dollars 11,000

How to answer National Development and Per Capita Income questions

Questions ask why per capita income is used, how to calculate it, how the World Bank classifies countries, and why averages can mislead. Data-based questions often use Tables 1.2 and 1.3.

1Define per capita income with the formula.
2Explain why total income is not used: different populations.
3For calculations, add all incomes, divide by the number of people, and show working.
4For limitations, use the Country A-Country B example: same average, different distribution.
5For World Bank classes, quote NCERT's thresholds and India's category.

National Development and Per Capita Income in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Averages hide disparities

Suppose a class of five students reports pocket money of Rs 200, Rs 200, Rs 200, Rs 200 and Rs 4,200 a month. The class monitor announces, 'Our average pocket money is Rs 1,000; we are all well off.'

Calculate the average and explain why the monitor's claim is misleading.

Try it first, then show the solutionSolution

Total = 200 + 200 + 200 + 200 + 4,200 = Rs 5,000.
Average = 5,000 / 5 = Rs 1,000.
Four of five students get only Rs 200.
Link to Table 1.2: same average, unequal distribution.

Answer: The total is Rs 5,000, so the average is Rs 1,000. But four students get only Rs 200 each, and one gets Rs 4,200. Like Country B in NCERT's Table 1.2, the average hides an unequal distribution. Average income is useful for comparison, but it does not tell us how income is shared.

Memory hook: One rich student can lift the average without lifting anyone else.

Tricks to remember National Development and Per Capita Income

Short memory aids. Say each one aloud once, then use it on a question the same day.

T / P
Per capita income = Total income / Population.
Use it when: Definition and calculations.
A and B, both 10,000
Same average, but A is fair and B is lopsided.
Use it when: Limitations of averages.
H-K-B order
Haryana > Kerala > Bihar in per capita income (2023-24).
Use it when: Table 1.3 MCQs.

National Development and Per Capita Income: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Definition · 1 mark · MCQBoard level

Per capita income is calculated as:
(a) total income x total population
(b) total income / total population
(c) total population / total income
(d) total income - total expenditure

Try it first, then show the solutionSolution

Average income is total income divided by total population (1 mark).

Answer: (b) total income / total population

Example 2: Why average income (3 marks) · 3 marks · Short answerBoard level

Why is average income, rather than total income, used to compare countries? What is its main limitation? (3 marks)

Try it first, then show the solutionSolution

Countries have different populations, so total income does not tell us what an average person earns (1 mark).
Average income = total income / total population, showing what a person is likely to earn; it is used by the World Bank to classify countries (1 mark).
Limitation: it hides disparities; it does not show how income is distributed among people (1 mark).

Answer: Countries have different populations, so total income cannot tell us what an average person earns. Average or per capita income, total income divided by population, allows fair comparison and is used by the World Bank to classify countries. But it hides disparities: it does not show how income is distributed among people.

Example 3: Assertion-reason: averages · 1 mark · Assertion-reasonHarder board level

Assertion (A): Two countries with the same average income may not be equally developed.
Reason (R): Average income does not tell us how income is distributed among people.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.

Try it first, then show the solutionSolution

Table 1.2: same average, different distribution; R explains A (1 mark).

Answer: (a) Both A and R are true, and R is the correct explanation of A.

Example 4: Data: Country A and Country B (3 marks) · 3 marks · Short answerHarder board level

NCERT's Table 1.2 gives monthly incomes of five citizens. Country A: 9,500; 10,500; 9,800; 10,000; 10,200. Country B: 500; 500; 500; 500; 48,000. (a) Calculate the average income of each. (b) Which country would most people prefer to live in, and why? (3 marks)

Try it first, then show the solutionSolution

(a) A: total 50,000 / 5 = Rs 10,000 (1 mark).
(a) B: total 50,000 / 5 = Rs 10,000 (1 mark).
(b) Country A: income is distributed equitably, with no one very rich or extremely poor; in B four citizens are poor and one extremely rich (1 mark).

Answer: (a) Country A: 50,000 / 5 = Rs 10,000. Country B: 50,000 / 5 = Rs 10,000. (b) Most people would prefer Country A, because its income is distributed equitably, with nobody very rich or extremely poor, whereas in Country B four of five citizens are poor and one is extremely rich.

Example 5: Per capita income and development (5 marks) · 5 marks · Long answerHOTS / competency

'Per capita income is a useful but incomplete measure of development.' Examine the statement. (5 marks)

Try it first, then show the solutionSolution

Useful: total income does not allow comparison between countries with different populations; per capita income (total income / population) does (1 mark).
Useful: the World Bank uses it to classify countries as high income, low income and so on; India is low middle income (1 mark).
Incomplete: averages hide disparities, as Countries A and B have the same average but very different distributions (1 mark).
Incomplete: Haryana has higher per capita income than Kerala but lags in infant mortality and literacy; money cannot buy everything, like a pollution-free environment (1 mark).
Incomplete: it ignores non-income goals such as security, equality and freedom; so other indicators are needed (1 mark).

Answer: Per capita income is useful because total income cannot compare countries with different populations, while total income divided by population shows what an average person earns. The World Bank uses it to classify countries, placing India in the low middle income group. But it is incomplete. Averages hide disparities: Countries A and B in NCERT's Table 1.2 have the same average of Rs 10,000, yet B's income is concentrated in one person. Haryana's per capita income exceeds Kerala's, but Kerala does better on infant mortality and literacy, since money cannot buy everything, such as clean surroundings. It also ignores goals like security and freedom, so other indicators are needed.

Example 6: Passage: comparing states (3 marks) · 3 marks · Short answerHOTS / competency

Read and answer. NCERT's Table 1.3 gives per capita income for 2023-24: Haryana Rs 3,25,759; Kerala Rs 2,81,001; Bihar Rs 60,337. (a) Which state is the most developed by this criterion alone? (b) Roughly how many times Bihar's per capita income is Haryana's? (c) Why might this ranking be incomplete? (3 marks)

Try it first, then show the solutionSolution

(a) Haryana (1 mark).
(b) 3,25,759 / 60,337 is about 5.4, so a little over five times (1 mark).
(c) Income does not show distribution or quality of life; Kerala, with lower income than Haryana, has a lower infant mortality rate and higher literacy (1 mark).

Answer: (a) Haryana. (b) About 5.4 times (3,25,759 / 60,337), a little over five times. (c) Per capita income ignores distribution and quality of life: Kerala earns less than Haryana per person but has a lower infant mortality rate and higher literacy, so income alone is an incomplete measure.

Where students lose marks in National Development and Per Capita Income

The slips examiners see most often, and what to write instead.

Mistake: Dividing by the wrong number
Counting only earners or only incomes listed.
Wrong working
Average = 50,000 / 4.
Right working
Divide total income by total population: 50,000 / 5 = 10,000.
Do this: Count every person.
Usually costs: 1 mark.
Mistake: Using total income to compare countries
Bigger total seems richer.
Wrong working
India is richer than Sri Lanka because its total income is higher.
Right working
Compare per capita income, since populations differ.
Do this: Always per person.
Usually costs: 1 mark.
Mistake: Assuming a higher average means everyone is better off
Distribution ignored.
Wrong working
Average income rose, so all are richer.
Right working
The rise may go to a few; averages hide disparities.
Do this: Use Table 1.2 logic.
Usually costs: 1-2 marks.
Mistake: Writing the dollar symbol wrongly or mixing currencies
World Bank uses US dollars; Indian tables use rupees.
Wrong working
India's per capita income is Rs 11,000.
Right working
About US dollars 11,000 in 2024 (World Bank, as in NCERT); state figures are in rupees.
Do this: Check the unit.
Usually costs: 1 mark.

Exam tips

Show your working in average-income calculations: total, then division.
Always add one limitation when asked about per capita income.
Quote Table 1.2's 'same average, different distribution' example; it fits many questions.
Economics in 2026-27 has 1-, 3- and 5-mark questions.

Practice questions on National Development and Per Capita Income

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
According to NCERT, India is classified by the World Bank as a:
(a) high income country
(b) low income country
(c) low middle income country
(d) developed country
Hint
About US dollars 11,000 in 2024.
Answer
(c) low middle income country
Q2 · 3 marks · Short answerHOTS / competency
Suppose records show that a country's average income has been rising for ten years. Can we conclude that all sections have become better off? Explain with an example. (3 marks)
Hint
Who received the increase?
Answer
No. The average can rise even if only a few people's incomes rise. For example, if in Country B only the richest person's income grows from 48,000 to 58,000 while the others stay at 500, the average rises from 10,000 to 12,000, but four of five citizens are no better off. Averages hide distribution.
Q3 · 1 mark · Assertion-reasonHarder board level
Assertion (A): For comparing countries, total income is the best measure.
Reason (R): Countries have different populations.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Different populations make total income misleading.
Answer
(d) A is false, but R is true.
Q4 · 3 marks · Short answerHarder board level
Give three limitations of per capita income as a measure of development. (3 marks)
Hint
Distribution, money cannot buy everything, non-income goals.
Answer
It hides disparities in how income is distributed. Money in one's pocket cannot buy everything needed to live well, such as a pollution-free environment or protection from infectious diseases, which are best provided collectively. It ignores non-income goals such as security, equal treatment and freedom.
Q5 · 3 marks · Short answerHOTS / competency
A country of four people has monthly incomes of Rs 6,000, Rs 7,000, Rs 8,000 and Rs 39,000. Calculate the per capita income and comment on whether it represents the typical citizen. (3 marks)
Hint
Add, divide by 4, compare with each income.
Answer
Total = 6,000 + 7,000 + 8,000 + 39,000 = Rs 60,000; per capita income = 60,000 / 4 = Rs 15,000. Three of the four citizens earn far below Rs 15,000, while one earns much more, so the average does not represent the typical citizen: it hides an unequal distribution.
Q6 · 5 marks · Long answerHarder board level
'Countries with higher income are more developed than others with less income.' Discuss the basis and limits of this view. (5 marks)
Hint
Basis: more income, more things. Limits: distribution, public goods, other goals.
Answer
The view rests on the idea that more income means more of all the things people need, so whatever people want they can get with greater income. That is why income is a key attribute for comparing countries, and per capita income is used because populations differ; the World Bank classifies countries this way. But the view has limits. Averages hide disparities: two countries with the same average may distribute income very differently. Money cannot buy everything, such as clean surroundings or protection from disease, which need collective provision. People also value security, equality and freedom. So income is an important but incomplete measure.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.What is per capita income?Show answer
Total income of a country divided by its total population.
2.Which reports use per capita income to classify countries?Show answer
The World Bank's World Development Reports.
3.What is the average income of Country A in Table 1.2?Show answer
Rs 10,000.
4.What was Bihar's per capita income in 2023-24?Show answer
Rs 60,337.
5.Which countries are excluded when rich countries are called developed?Show answer
Countries of the Middle East and certain other small countries.

National Development and Per Capita Income: frequently asked questions

What is per capita income in Class 10?

The average income of a country: its total income divided by its total population.

Why is per capita income used instead of total income?

Because countries have different populations, so total income cannot show what an average person earns.

What are the limitations of per capita income?

It hides inequality, cannot measure goods money cannot buy, and ignores goals like security and freedom.

How does the World Bank classify countries?

By per capita income into high income, middle income and low income countries; NCERT places India in the low middle income group.