Well tell me what total imports/exports are for India, BD and even China as % of GDP?
BD for example has 50%+ of its average household expenditure on food.
I've talked to the Chinese members on the issue before, it may be of interest for you to read:
https://defence.pk/pdf/threads/india-and-china-a-gdp-comparison.455611/page-4#post-8811612
https://defence.pk/pdf/threads/india-and-china-a-gdp-comparison.455611/page-4#post-8812159
And how much % do iphones (and final white- good consumables in general) figure in the yearly budget for the average household of all these countries?....compared to not only food, but overall steel, cement, energy, transport etc that have far more multiplier effects in practically everything you buy/consume?
Therein lies the basic answer to why PPP is especially more important to developing countries that have small representation of trade in their total economy. BD definitely counts as one.
And how much do these figure in the
average BD household consumption pattern? Is BD a totally import driven and dominated market? A cursory glance of import/GDP and trade balance/GDP ratio should tell you the answer.
You want to tell me what will happen if all the BD people exchange every taka they have for USD so they can import all their needs from the outside world? What that would do to the Taka value as that exercise is underway? That in effect is what nominal represents at a snapshot. It thus has limited direct utility for any developing country.
As a country becomes move developed and integrated with all levels and manner of supply/demand chains globally, the PPP/Nominal difference is also reduced over time. Thats what we see in full flow in the case of China and starting in India. It does nothing for countering the basic fact that PPP is a much more suitable measure for a country that has low trade/GDP, large informal economy and one's who's consumption profile (and thus appropriate price level basket) is largely based on local food, local basic goods and local basic services rather than what it trades through relative insulation from the world economy.
Effectively the demand/supply for your external trade is not 1 to 1 correlated (and actually no where close) with the demand/supply of your domestic economy. How does the ratio of the former (which is essentially what an exchange rate is given currencies are the intermediaries) totally govern the latter ratio? As long as this transfer coefficient exists in any appreciable way, there will be a big reason to apply PPP over nominal.
Says someone who hasn't read the ICP papers....and probably doesn't even know what the ICP is and how it calculates the PPP using a price level basket.
